REITs, InvITs pick up steam; mutual funds pour in Rs 12,000 crore in 2019

Emerging investment instruments REITs and InvITs seem to be finally catching investors’ fancy, with mutual funds investing a whopping Rs 12,000 crore in such units in 2019. Fund managers infused Rs 670 crore in real estate investment trusts (REITs) and Rs 11,347 crore in infrastructure investment trusts (InvITs) last year, according to the Securities and Exchange Board of India (Sebi).

Mutual funds have increased their exposure in these investment avenues over the past one year. Investment by fund houses in REITs jumped to Rs 72.5 crore in December 2019 from a mere Rs 7 crore in January 2019, while the same in InvITs rose to Rs 948 crore from Rs 611 crore during the period under review.

Market experts believe that REITs could be a potential investment option giving good returns as interest of investors in the residential segment is declining due to inability to monetise assets and limited appreciation in property prices. They further said that investment in InvITs may pick up in the coming months following Reserve Bank of India’s decision to allow banks to lend to InvITs.

Sebi Chairman Ajay Tyagi, who had met scores of foreign investors in the US in October, said he saw keen interest from them in emerging areas such as REITs and InvITs. During the meeting, the participants were enthusiastic about emerging areas such as REITs and InvITs, which have more than USD 10 billion asset size as on date.

Sebi first issued the guidelines for REITs and InvITs in 2014, and revised them in 2016 and 2017.
However, mutual funds, which are investment vehicles made up of a pool of funds collected from a large number of investors and invest in stocks, bonds, money market instruments and similar assets, were allowed to invest in REITs and InvITs in February 2017.

The move was part of the markets watchdog Sebi’s effort to get more number of investors into such instruments. Under the norms, a mutual fund has been permitted to invest only up to 5 per cent of its net asset value in units of a single issuer of alternative securities. The maximum allowed investment in alternative instruments by a single fund has been capped at 10 per cent.

Ever since Sebi introduced InvITs, markets witnessed the listing of two public InvITs — IRB InvIT Fund and India Grid Trust. Three InvITs — IndInfravit Trust, India Infrastructure Trust, Oriental InfraTrust — were privately placed. On the other hand, Embassy Office Parks REIT is the only listed real estate investment trust.