REITs and InvITs

Ahead of the Union Budget 2018-19, analysts are demanding that it is important to realise that the REITs and InvITs aren't merely investment vehicles but an alternative to the capital markets. 

A fully functional REITs and InvITs regime will allow real estate and infrastructure companies to utilise their assets to generate capital that they can reinvest in their businesses. A fully functional REITs and InvITs regime will also allow transparency and clarity around asset quality, thus allowing investors to separate the good investments from the rest of the pack

Simply put, InvIT is a mechanism that enables developers of infrastructure assets to monetise their assets by pooling multiple projects under a single entity (trust structure). InvITs are a first-of-their-kind really long-term instruments. At present, Government Securities or G-secs are the only other instruments with such a long life. 

InvITs too may be structured as funds with a very long tenure or open end structure. Bear in mind, since the regulations are new, most of the InvITs that come to raise money will have a very short or no track-record. InvITs have to ensure that they distribute 90% of their net cash flows to the unit investors.  There is a leverage cap of 49% on the net asset value. There is also a cap on exposure to under-construction assets (for publicly placed InvITs). 

The sponsor of the InvIT is responsible for setting up the InvIT and appointing the trustee. The sponsor shall hold minimum 15% of the units issued by the InvIT with a lock-in period of three years from the date of issuance of units, Kumar Shankar Roy writes at Valueresearchonline.com A real estate investment trust (REIT) is a company that owns, and in most cases operates, income-producing real estate. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers, hotels and timberlands. Some REITs engage in financing real estate. 

Indian REITs (country specific/generic version I-REITs) will help individual investors enjoy the benefits of owning an interest in the securitised real estate market. The greatest benefit will be that of fast and easy liquidation of investments in the real estate market unlike the traditional way of disposing of real estate, according to Wikipedia.