REIT, InvIT, municipal bonds market to match size of India’s GDP, says SEBI chairperson

Currently, in the listed space, some of the InvITs and REITs include Embassy Office Parks, IRB Infrastrcuture Trust and NHAI InvIT.

SEBI chairperson Madhabi Puri Buch expressed confidence in the growth potential of REITs, InvITs and municipal bonds, saying that the market for these securities could grow as big as India’s GDP, just like the equity markets right now.

The value of REITs (real estate investment trusts), InvITs (infrastructure investment trusts), and municipal bonds would far exceed the value of goods and services produced by the corporate sector, Buch said at an event in Mumbai.

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REITs and InvITs are investment vehicles that allow developers to monetise revenue-generating real estate and infrastructure assets, by securitising and allocating units to investors without physically transferring the assets.

Buch mentioned various steps that the regulator has taken to facilitate the fractional ownership of real estate and infrastructure.

The first step was to let retail investors know that the regulator is comfortable with the three asset classes. “The governance elements of these asset classes and the disclosure elements of these asset classes gives us the comfort to tell retail investors that we are comfortable with the governance and disclosure norms of these asset classes and retail investors can think of investing in such asset classes,” Buch said.

Another thing was to bring down the minimum investment price, which was kept high initially considering the high-risk profile of investment products like REITs. “The objective is that we should facilitate many smaller and smaller units of REITs ownership to be diverse and to be democratically held across Indian citizens,” she added.

Buch said that there is growing and significant interest among foreign investors for InvIT space. “We know the pitfalls in the infrastructure sector but the way InvITS are structured, with escrowed accounts, and ring-fencing for bankruptcy has resulted in increased confidence in Indian InvIT assets.”

Currently, in the listed space, some of the InvITs and REITs include Embassy Office Parks, IRB Infrastrcuture Trust and NHAI InvIT.

Separately, Buch said that the upcoming inclusion of India’s sovereign debt in global indices would also generate a significant interest in the corporate debt.

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JP Morgan said in September 2023 that it will add Indian government bonds to its Government Bond Index-Emerging Markets global index suite from June 2024. Bloomberg Index Services also said this month that it will add India Fully Accessible Route (FAR) bonds in the Bloomberg Emerging Market Local Currency Index from January 31, 2025. The inclusion of these bonds will be phased in over a 10-month period starting on the rebalance date of January 31, 2025.