REITs and InvITs Mark a Tenfold Increase in Fund Mobilisation in 2023

In a significant financial shift, the collective fund mobilisation for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) soared to Rs 11,474 crore in 2023. This amount starkly contrasts with the preceding year's funds, which touched a record low of Rs 1,166 crore in 2022. The escalated funds in 2023 represent a nearly tenfold increase, underscoring both the enhanced market confidence and the growing appeal of these investment vehicles.

Rising Popularity and Regulatory Support

REITs and InvITs have witnessed a surge in popularity among investors, thanks to regulatory support from the Securities and Exchange Board of India (Sebi) and the compelling returns that these investment vehicles offer. Especially noteworthy in this rise is the encouragement from Sebi, which has initiated multiple regulatory changes to streamline investments into InvITs and enhance governance standards for REITs. These actions include lowering the lot size for transactions, facilitating bank lending, and permitting increased leverage up to 70 percent.

Anticipated Growth Factors for 2024

Looking forward, experts predict that REITs and InvITs will continue to experience robust growth. Claravest Technologies co-founder Manaki Parulekar indicated that potential rate cuts and policy changes, such as tax incentives and relaxed investment norms, could bolster market growth next year. Furthermore, as the investment community becomes more familiar with these asset classes, and infrastructure projects become increasingly prioritised by the government, these trusts could offer a valuable avenue for investment and capitalisation.

Background and Market Impact

REITs and InvITs have not been in the Indian market for long but have quickly gained a solid footing as reliable investment options, known globally for their robust returns and capital growth opportunities. Presently, India's financial landscape boasts 23 registered InvITs and 5 REITs, managing assets that exceed Rs 30,000 crore in value. Sebi continues to strengthen regulations around these trusts to improve transparency and governance, setting high disclosure requirements and implementing measures like Unitholder Nominated Directors and caps on leverage.

Investor Advantages and Market Outlook

Industry leaders assert that investment trusts play a critical role in unlocking capital for infrastructure developers, allowing them to pursue additional projects. They also provide investors with visibility on cash flows and regular, assured returns, thanks to mandated income distribution percentages. With Sebi's ongoing efforts to improve investment procedures and trust governance, the future for REITs and InvITs looks promising, signalling a significant shift in preference towards these investment avenues and a likelihood of continued investment growth.

REITs, InvITs, Growth