US short seller firm Hindenburg Research has alleged in their latest report that Dhaval Buch, the husband of Madhabi Buch, the current Chairperson of the Securities and Exchange Board of India (SEBI), was appointed as a Senior Advisor to Blackstone, a global private equity firm, in July 2019 despite having no prior experience in private equity, real estate, or capital markets—industries central to Blackstone's operations.
Citing a potential conflict of interest, Hindenburg said that Madhabi Buch, who became SEBI Chairperson in March 2022, oversaw significant regulatory changes that greatly benefited the REIT industry. These changes were particularly advantageous for Blackstone given its growing dominance in the Indian REIT market. In December 2023, Blackstone completed a full exit from the Embassy REIT, selling its stake for approximately INR 71 billion (USD 853 million), making it the largest block trade of the year in India. This transaction further highlighted Blackstone’s significant role in India’s real estate market during Dhaval Buch’s tenure as Senior Advisor.
"In the context of allegations made in the Hindenburg Report dated August 10,2024 against us, we would like to state that we strongly deny the baseless allegations and insinuations made in the report. The same are devoid of any truth. Our life and finances are an open book. All disclosures as required have already been furnished to SEBI over the years. We have no hesitation in disclosing any and all financial documents, including those that relate to the period when we were strictly private citizens, to any and every authority that may seek them. Further, in the interest of complete transparency, we would be issuing a detailed statement in due course. It is unfortunate that Hindenburg Research against whom SEBI has taken an Enforcement action and issued a show cause notice has chosen to attempt character assassination in response to the same," reads a press statement by SEBI chairperson Madhabi Puri Buch and her husband Dhaval Buch.
How REITs Work
A REIT is a hybrid fixed-income instrument offering a transparent, regulated, and diversified platform to earn regular income and potential capital appreciation over a 3-4 year period. While investing in a REIT may depend on personal choices and risk tolerance, experts point out several key factors to consider when investing in a REIT. The first is the quality of the assets and the scope for diversification. REITs with diversified assets across multiple markets (cities) are considered lower-risk options for investors. Additionally, one should examine the tenant profile in a particular REIT—the industry they belong to and the markets they dominate. The quality of the tenant portfolio is crucial for assessing the risk level of the investment. Lastly, the sponsor is an important factor, as the new assets a REIT plans to bring in depending on the sponsor. Experts say that REITs as an asset class will grow, and new acquisitions should add value.
The REIT Market in India
REITs are in a relatively nascent stage in India, and there are currently four listed REITs. According to JLL Capital Markets research, Embassy Business Park REIT has an occupancy rate of 83%, with assets spread across Bengaluru (75%), Pune (9%), Mumbai (10%), and NCR (6%). It has completed 35.5 million square feet (msf) of development, with 9.9 msf under construction. Mindspace Business Park REIT has an occupancy rate of 87.3%, with assets in Pune (17%), Mumbai (40%), Hyderabad (40%), and Chennai (3%). It has completed 26.2 msf of development, with 5.23 msf under construction. Brookfield India Real Estate Trust has an occupancy rate of 88%, with assets in Mumbai (15%), NCR (69%), and Kolkata (16%). It has completed 20.7 msf of development, with 4.6 msf under construction.
What’s Ahead for REITs
According to experts, real estate investment trusts (REITs) are poised for significant future growth as they diversify into additional asset classes like industrial, data centers, hospitality, healthcare, and education. Although still in the early stages in India compared to other investment avenues, REITs are also set to benefit from the impending turn in the interest rate cycle. Experts believe that while interest rates are currently at their peak, they are likely to decrease. When this happens, it will positively impact REIT prices, which are expected to rise since REITs are partially public market investments and partially stable income investments, with demand likely to increase as interest rates decline.
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