Assets worth over ₹1 trillion in real estate space are likely to be listed in near to medium term while assets worth over ₹2.5 trillion are expected to be monetized through InvITs across segments such as roads, gas pipeline, digital fibre etc
Mumbai: Led by steady pipeline of infrastructure investment trust (InvITs) and real estate investment trust (REITs), both the instruments are expected to see healthy traction in the near to medium term, according to rating agency Icra.
As per its estimates, assets worth over ₹1 trillion in real estate space are likely to be listed in near to medium term while another set of assets worth over ₹2.5 trillion are expected to be monetized through InvITs across various segments such as roads, gas pipeline, digital fibre, power transmission and renewables.
“With track record of more than five years for InvITs and two years for REITs, supporting regulatory framework and the increase in comfort levels of various stakeholders on these platforms; the potential remains huge," Shubham Jain, Group Head & Senior Vice President, Corporate Ratings, Icra said.
In the last two years, InvITs have monetised assets worth ₹85,300 crore. During the same period, all three REITs valued at ₹77,100 crore were listed. With InvITs and REITs now recognised as borrowers under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI) Act, lenders to these trusts, have adequate statutory enforcement options, absence of which was earlier becoming a constraint for bankers to lend directly at trust level, Icra said.
Further, insurance regulatory and development authority of India (Irdai) has recently allowed insurers to invest in debt instruments of InvITs and REITs rated AA and above as a part of their approved investments, which shows growing comfort of lenders as well as investors around such structures, it said. Clarifications on the tax-free nature of dividend distribution from these trusts have also resulted in them being viewed more favourably.
“The supporting regulatory framework for various stakeholders attracted both debt and equity investors towards these trusts. Till date assets worth ₹2.1 trillion have been floated through these platforms – 64% through InvITs and 36% through REITs. Lenders are also increasingly becoming comfortable lending to such structures," Jain added.
The capital raising by these trusts is also aided by the favourable view that investors have taken on the long-term revenue generation potential of such infrastructure and real estate assets in the country, according to Jain.