REITs seeks equity tag

Mumbai: Indian Real Estate Investment Trust (REIT) industry on Wednesday pitched for the entities to get access to direct bank lending and classification as equities.

At present, such vehicles can issue bonds or borrow from non-bank lenders or mutual funds (MFs), but are prohibited to borrow from banks, said the Indian REITs Association (IRA), a newly formed umbrella body for the five-year-old sector, which comprises four listed entities. The body’s Chairman and Embassy REIT’s Chief Executive Arvind Maiya told reporters it is in touch with the RBI (Reserve Bank of India) for allowing banks to lend to such vehicles.

The real estate industry is asset-heavy and needs funds regularly to buy assets for which it should be allowed to borrow directly from banks, he added. Typically, banks have access to deposits which brings down the cost of funds. Hence, the cost of borrowing can become softer for a borrowing entity.

Alok Aggarwal, MD and Chief Executive of Brookfield India Real Estate Trust, said, at present REITs are classified as a ‘hybrid’ instrument, which creates confusion in the minds of the investors. Maiya said classification as equities will lead to passive money coming into REITs as the instrument gets included in indices.