Indian REITs

India is following the lead of a number of European and Asian countries that have accepted the REIT organization of public rights of real estate in the past few years. There is attention to be paid in the Indian REIT market, due to its strong growth. Investors must be aware of the fact that REITs opened in Germany and Britain have taken a beating, in part because of the credit crisis. That works as a warning that REIT stocks are not without risks for investors. On contrary this situation in India is quite attractive for the investors.

The organization of REIT businesses would offer a badly needed capital infusion to India’s small real assets market. India’s estate market has been dominated by foreign ownership property limits, some of which were on the rise in 2005. When foreign investors will be allowed to invest in Indian REITs, the benefit is likely to get to a high level. The reason is that India’s economy is getting stronger and there has been noticed a quick development of the real estate market.

It is predictable that real estate progress in India could grow to $US90 billion by 2015 from $US12 billion in 2005.  When the organization of Indian REIT market is eventually finalized, it is probable to be comparable to that of the British REIT market.  In contrast to the US, in Britain there is a limit on how much an Indian REIT can borrow. But investors in India will hope that REITs will have a better start than they when they were created in Britain and Germany.

India has a progressive starting point of taxation for persons. Every individual has to pay a tax at a rate depending on their appropriate income.  If tax were to be forced by the level of the REIT, at say thirty plus add on, then the income to a secondary investor or a pensioner who is at a lower range would be illegally damaged. This would beat the very fundamental philosophy behind REIT.  The philosophy tries to allow retail investors to take small positions in an efficiently managed portfolio of assets and split the profits. In the case when the taxes will get to a REIT level then they could not do that straight.

There are lessons to be learned from all market stages and phases.  No procedure is perfect and looking back, whether in India or in a foreign country, whenever there has been a collapse, controls have tightened and greater authority has been introduced.

It may not be reasonable to analyze only the evaluation organizations.  They have an important part to play in helping both the investors and the managers. The organizations have to teach the investors on how to take an up to date decision. On the other hand they have to show the managers how to recognize the major filters for market entry and business deal level exposures. Auditors also have a significant position, maybe more so as they use much more of a direct error on the quality of economic reporting and controls.