Over the past two decades, the global commercial real
estate sector has seen a dramatic shift from private sector to public
markets. The Indian real estate industry’s growing demand for additional
sources of funds and the success story of global real estate investment
trusts (Reits) is compelling enough to encourage the implementation of a
similar regime in India with requisite adjustments. Typically, Reits
invest in completed, revenue generating commercial properties and
distribute a major portion of the earnings among investors. They have
proven to be an attractive investment option for retail investors as
well as for long-term pools of capital such as pension funds and
insurance companies who prefer to have a regular income stream.
Historically, global Reits have been able to generate significant market
traction. The US Reit industry’s market capital, for example, has grown
at an average annual rate of nearly 23% in the past 20 years.
Besides other advantages, Reits bring in increased transparency in
the sector by adopting better corporate governance, disclosures and
financial transparency practices. Being required to comply with the
corporate governance, information disclosure and financial reporting
standards laid down by the regulator, Reits will bring in a regular
information exchange and availability in the public domain. This will
result in higher professionalism with a clear emphasis on issues such as
risks attached to titles and transaction costs. To read more please visit - livemint.com
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