Market regulator SEBI has eased the rules on Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). Even though the REIT norms were issued in 2014, there had been little response.

The new rules make hotels and hospitals eligible for issuing REITs. Speaking to BTVi , DLF CEO Rajeev Talwar says the move is a welcome step and makes Indian REITs one of the most competitive globally. DLF, which is in the process of selling 40 per cent stake of DLF Cyber City for ₹12,000-14,000 crore, expects to issue REITS within FY17, subject to regulatory clearances from the government, the RBI, SEBI and other institutions. Excerpts:

What’s your broad view on the REIT norms, which have been eased and allows a few more industries to issue REITs into a two-level SPV (Special Purpose Vehicle) structure through the holding company?

The REITs were first announced in July 2014. First of all, it was delayed for a country like India, which had weathered the storm of the 2008 global financial crisis.

Till about 2010, it was quite okay, but then it subsequently went down. So this is a very serious matter; it means completed and leased assets being put out in the form of units to the public at large.

But prior to that ,there is a stage of forming an SPV, which means that the due diligence of the leased asset is completed and done by various investors. They could be Indian, but they are expected to be largely foreign, who are coming into India to bet on higher, consistent and long-term returns on assets, which are completed and leased out.

This process is time-consuming and therefore one should not expect a quarter-on-quarter or year-on-year strictly after the announcement of such reforms in the country.

The two-tier structure is a good thing because it moves first from the holding company to the SPV;and a new set of directors, who are the firm’s investors and large-scale holders, will decide with the original owners on what kind of market offering to make, depending on the circumstances of the market the leased-out assets and the prospects of those assets in the long term.

So it is a very hard process to go through. It is a process which takes time because it involves law firms, bankers, investors and individual unit holders of the REITs — who expect it would be a safe investment and also a long-term investment which will give them a regular return and a long-term upside on the value of the unit.

DLF can issue an REIT once you sell 40 per cent of DLF Cyber City’s stakes. When will that happen?

Analysts have said the stake sale could fetch ₹12,000-14,000 crore.

With all the regulatory clearances from the government, the RBI, SEBI and other institutions, the fund flow is expected to start within this financial year.

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