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COVID-19 impact: REITs may see short term pressure on rental outflows

Apart from capital gains, returns from REITs include dividend which are currently over 7 percent.

Real estate investment trust (REITs) and the commercial real estate market may face short-term pressures on account of novel coronavirus, or COVID-19. However, with India being an IT outsourcing destination globally, commercial real estate will continue to be a resilient, low risk and high return asset class, Sanjay Dutt, Joint Chairman, FICCI Real Estate Committee and Managing Director and CEO, Tata Realty and Infrastructure, stated.

Dutt was one of the expert at a webinar organised by Savills India, a leading international property consultant, and Federation of Indian Chambers of Commerce & Industry (FICCI), titled 'India REIT:A potential investment window'.

 

Savills India and FICCI also released a research report that provided an overview of REITs, its importance to retail investors and its growth potential in India.

REITs are relatively secure as 80 percent of the underlying assets are required to be operational and income-generating. Moreover, the diminishing returns in other investment avenues such as public providend fund (PPFs), fixed deposits (FDs), recurring deposits (RDs) and government bonds when compared to the superior pre-tax yields of REITs makes it a lucrative option.

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COVID-19 Vaccine

Frequently Asked Questions

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How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

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Apart from capital gains, returns from REITs include dividend which are currently over 7 percent.

India’s sole REIT, launched in early 2019, has outperformed the market, not merely in normal circumstances but even during the ongoing pandemic.

By FY21 end or Q1 FY22, about 100 million sq ft of office space will come under REIT as two public issues are in pipeline, an expert said. Mindspace Business Park, owned by K Raheja Corp and Blackstone, is launching its Rs 4,500 crore REIT public issue on July 27.

The report sees commercial leasing activity forming the backbone of REITs in India.

 
Moneycontrol News
first published: Jul 22, 2020 10:49 pm

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