As real estate investment trusts are yet to take shape in India, about a half a dozen realty firms have started the spadework for listing REIT-like vehicles on the Singapore Stock Exchange.
Banking on the easing of listing norms by the SGX two months ago, the Bangalore-based developer Embassy group, Ascendas, provider of business space solutions in Asia, and the Delhi-based DLF and Unitech are planning to list their fund structures, which mainly include REITs, on the SGX.
Embassy group has already submitted the papers with the SGX to launch a $150 million IPO. The trust will be managed through a joint venture partnership with Singapore's Mapletree Investments, a unit Temasek Holdings.
Meanwhile, it is also reported that DLF Assets may go for a listing in the near future as a REIT on the SGX. DLF Assets is promoted by KP Singh and is a separate entity from DLF, which recently floated India's largest IPO. DLF Assets has already acquired certain assets of DLF in the special economic zones.
Unitech, which raised £362 million through an AIM listing last year by floating a SPV for six IT/ITeS projects, is also planning to list REITs overseas, including Singapore.
"One of the reasons behind the AIM listing was to create a platform for REITs. We have created a development fund which can now be sold overseas," Sanjay Chandra, managing director, Unitech had said.
A REIT is a tax-efficient vehicle for a corporation investing in real estate. REITs are required to distribute 90 per cent of their income, which may be taxable in the hands of the investors. The REIT structure was designed to provide a similar structure for investment in real estate as mutual funds provide for investment in stocks.
Since no Indian REIT is listed on the SGX, developers are sceptical. However, KPMG executive director Jai Mavani said since the China-specific realty funds have raised over $1 billion so far from the SGX, there is no reason why the India-specific funds should not do well on the the SGX.
"Since there no regulations in place in India, there are many grey areas. But what is clear is that only a development REIT can be listed, that is the project cannot be completely finished and some development must be incomplete. Secondly, to bring back the capital raised by an Indian firm's REIT at Singapore, the project will have to comply with Foreign Direct Investment norms or with rules laid down by the Special Economic Zones Act," said a Delhi-based developer, who is seriously considering a REIT.
SGX is popular for property trusts since it has nearly 20 REITs listed on it, which are mostly from South East Asia including China, Singapore and Hong Kong and Australia.