SEBI to outline framework for REITs

Speaking to mediapersons after an interactive session with members of Bharat Chamber of Commerce in Kolkata on Thursday, Sebi chairman C.B. Bhave said: "The regulator is not averse to the idea of REITs. We may look at REITs at a later stage. But before that, the regulator would assess the workings of real estate mutual funds."

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Sometime in April 2008, Sebi had prepared norms for real estate mutual fund. But the launch of real estate MF was delayed due to market meltdown. Incidentally, REITs is a trust that uses the pooled capital of many investors to purchase and manage real estate assets and/or mortgage loans.

REITs are traded on major stock exchanges like normal stocks. There are three type of REITs popular in USA and in other advance economies namely equity REITs, mortgage REITs and hybrid REITs.

According to Mr Bhave, the main hindrance for introducing REIT like products in India is lack of transparency in the real estate market, variable stamp duties in different states and absence of uniform price of land and properties across India.

"We have already spoken to the union government to bring about a uniformity in stamp duties across states but it would obviously take sometime," he added.

Commenting on the transparency in different investment avenues, Mr Bhave said that the regulator is also working on new guidelines for portfolio management schemes (PMS).

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"We want to ensure that a PMS client gets to know his exact asset portfolio directly through depository participants independent of the portfolio managers. This is essential to infuse credibility in the PMS system," he said.

Earlier addressing Bharat Chamber of Commerce members, Mr Bhave said that the regulator is working on new delisting guidelines. Though it will take sometime, Sebi want to ensure that the retail investors are not left in the lurch.