Realty stocks gain up to 4.5% after RBI allows banks to invest in REITs, InvITs

The RBI’s decision to allow banks to invest in REITs and InvITs will bring sanctity to realty stocks from a retail investors perspective, says BSE Brokers Forum spokesperson


The shares of DLF surged 4.48%, Unitech by 3.25% and Prestige Estates by 1.92% on BSE. Photo: Mint
The shares of DLF surged 4.48%, Unitech by 3.25% and Prestige Estates by 1.92% on BSE. Photo: Mint

New Delhi: Realty stocks were in limelight on Thursday, rising up to 4.5%, after the Reserve Bank of India (RBI) allowed banks to invest in Real Estate Investment Trust (REITs) and Infrastructure Investment Trusts (InvITs).

Shares of DLF surged 4.48%, Unitech by 3.25% and Prestige Estates by 1.92% on BSE. Godrej Properties (1.88%) and Oberoi Realty (1.79%) also advanced. The BSE realty index rose by 2% to close the day at 1,704.64 points.

“The RBI’s decision to allow banks to invest in REITs and InvITs will bring sanctity to these instruments from a retail investors perspective and the latter will find the confidence to invest in such trust in sync with mutual funds as an investment class.

Apart from banks participation seen by retail investors as a safe due diligence for investment in such trusts, these instruments in turn will revive the beleaguered real estate and infrastructure companies and provide much needed relief to the commercial real estate sector that is facing liquidity crunch and delay in completion of existing projects,” said Kamlesh Shroff, spokesperson of BSE Brokers Forum.

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Moreover, InvITS will also bring in retail investor and offer them the opportunity to earn regular returns as is the case with corporate bonds and fixed deposits with the added possibility of an upside on equity (capital gains), unlike tax deducted at source in case of fixed deposits and bonds, Shroff added.

Banks are allowed to invest in equity-linked mutual funds, venture capital funds (VCFs) and equities to the extent of 20% of their Net Owned Fund (NOF). “It is proposed to allow banks to invest in REITs and InvITs within this umbrella limit. Detailed guidelines will be issued by May-end 2017,” the RBI said in its first bi-monthly monetary policy for 2017-18.

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