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India has witnessed a significant surge in fund mobilization through Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), accumulating a total of Rs 18,658 crore during the April-September period of the current fiscal year. This growth is attributed to robust demand for infrastructure investments, favourable government policies, and attractive returns.
Industry experts anticipate this trend to continue in the second half of the year, given the ongoing focus of central and state governments on infrastructure development. Experts expect fresh savings and investments to be directed mainly toward InvITs.
During the April-September 2023-24 period, Rs 12,753 crore was raised through InvITs, with the remaining Rs 5,905 crore coming via REITs. Notably, in the entire 2022-23 fiscal year, listed InvITs raised Rs 2,596 crore, while listed REITs did not mobilize any funds. Several factors contribute to this surge, including government policies, high demand for real estate investment, and the government's emphasis on urbanization and infrastructure development.
Additionally, these instruments offer regular income to investors, as both REITs and InvITs are required to distribute 90% of their income regularly. They provide diversification benefits, liquidity due to trading on stock exchanges, and increased awareness and investor interest.
The government and the Securities and Exchange Board of India (SEBI) have played pivotal roles in promoting and popularizing REITs and InvITs in the country. InvITs have been more successful in fundraising than REITs thanks to their broader asset range that includes roads, highways, railways, power transmission lines, renewable energy projects, and gas pipelines. They are also exempt from paying income tax at the trust level which enhances their attractiveness to investors, making them a preferred choice.
A REIT comprises a portfolio of leased commercial real assets, while InvITs consist of infrastructure assets such as highways and power transmission assets. Both play a crucial role in helping infrastructure developers monetize their assets and reinvest capital in upcoming projects.
With the infrastructure sector in India expected to grow significantly in the coming years, the growth of InvITs is likely to be further driven. These instruments, while relatively new in the Indian context, are well-received in global markets, particularly among passive income investors due to the appealing yields and capital appreciation they offer.
Mutual fund exposure to REITs and InvITs was valued at Rs 8,416 crore as of September 30, 2023, indicating growing interest in these investment options. However, despite their potential, these investment instruments are still relatively new to Indian investors and are just beginning to gain traction. As of August 8, 2023, only 4 REITs and 22 InvITs were registered in the country.
In conclusion, the surge in fund mobilization through REITs and InvITs in India during the April-September period reflects the growing demand for infrastructure investments, boosted by favorable government policies and attractive returns. Experts expect this trend to persist in the second half of the fiscal year, with a particular focus on InvITs. With India's infrastructure sector poised for significant growth, the success of InvITs is expected to continue, despite being relatively new in the Indian context. These instruments are becoming more popular among Indian investors, offering appealing yields and capital appreciation.
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