Hindenburg report: REITs Association backs SEBI, says allegations of framework favouring select few 'baseless'

The Indian REITs Association said that the entry of marquee investors in the REIT ecosystem provides trust for investors to enter the real estate market

The Indian REITs Association, an advocacy body for the four listed real estate investment trusts in India, said that allegations in the Hindenburg Research report that the Securities and Exchange Board of India (SEBI) updated the regulatory framework for REITs to benefit a "select few" in the industry, are "baseless and misleading".

The Hindenburg report alleged that the SEBI frequently updated regulations for REITs for the benefit for key industry backers such as the private equity firm Blackstone, and SEBI chairperson Madhabi Puri Buch often touted REITs as an investment class, at the same time as her husband is serving as an advisor to Blackstone.

Hindenburg's report regarding REITs mainly concerned SEBI Chairperson Madhabi Puri Buch's husband Dhaval Buch's role as a senior advisor at Blackstone, which has been a key player in the development of REITs as an asset class, backing all but one of the four listed REITs in India. The private equity giant has since exited two of the three REITs that it backed - Embassy Office Parks REIT and Mindspace Business Parks REIT - and has pared its stake in Nexus Select Trust, now down to around 22 percent. The other listed REIT, Brookfield India REIT, is sponsored by Brookfield Asset Management.

"Recent claims suggesting that the REIT framework serves the interests of a select few are baseless and misleading. Since the introduction of REIT regulations in 2014, India has established a strong and transparent regulatory framework that aligns with global best practices. Developed in consultation with all market participants, this framework ensures the highest levels of investor protection for both: domestic and international institutional investors, as well as retail investors," said the statement from the Indian REITs Association.

The statement further added that the participation of major institutional investors in REITs provides investors with a "dependable and transparent avenue to engage in the country’s expanding real estate market", besides strengthening the "trust and credibility" in India's financial system.

In its report, the short-seller entity Hindenburg said that the SEBI chairperson Madhabi Puri Buch's husband, Dhaval Buch, has been an advisor to Blackstone, having been appointed in 2019 despite no experience working in funds, real estate, or capital markets at large. During the same time, the Hindenburg report alleged, SEBI has frequently issued consultation papers and updated regulations on REITs, with SEBI officials, including Madhabi Puri Buch, often recommending REITs as an emerging asset class.

Responding to the Hindenburg report, Madhabi Puri Buch and Dhaval Buch said that the latter's appointment as an advisor to Blackstone pre-dated the former's appointment as SEBI's head, with Blackstone being added to Madhabi's recusal list to avoid conflicts of interest. Sources close to Blackstone reported that Dhaval plays no role in REITs, real estate, or regulatory matters at the firm, and limits his work to supply chains, having earlier been the chief procurement officer at consumer goods giant Unilever.