MUMBAI: Canadian asset management firm Brookfield is looking to set up a real estate investment trust (REIT) and list it in India once the country finalised rules governing these entities that typically provide high dividend yield along with capital appreciation to investors.
The REIT that Brookfield is considering could be valued at about $500 million (.`3,085 crore), two people in the know said.
"Brookfield is exploring to just bring selective properties under one umbrella and get it listed first (as REIT)," a person close to the development told ET. "The REIT would be set up and listed on one of the stock exchanges."
Brookfield had bought 100% stake in four special economic zones and 60% in two other assets owned by Unitech and Unitech Corporate Parks in June last year for around Rs 3,500 crore. This was the biggest real estate deal in 2014.
Brookfield refused to comment on queries about REIT plans. Unitech didn't respond to an email seeking comment.
"Theoretically, Brookfield can include all the properties on the stock market after registering them as REIT. Yet they are concerned whether the Indian capital market has a capacity to absorb these rental assets," said the second person. Brookfield is unlikely to bring all the properties that it bought last year from Unitech under the REIT.
This is mainly due to the concern that other private-equity and asset-management firms which are present in the sector could also flood the capital market with REIT listings.
According to media reports, Blackstone is looking at raising funds by listing its properties in India through REIT route. Industry trackers say there are at least two other players who too could set up and list REITs.
REITs typically own commercial or retail real estate properties. The rent on these properties is treated as income, and retail investors can invest in the companies when they get listed.
While REITs are a popular real-estate investment route in matured markets like the US, India gave its in-principle approval to the instrument only in 2014. Investors are now waiting for the budget where the government is expected to give clarity around REITs.
The finance ministry, industry trackers say, is likely to set out rules that would govern the trusts and clarify tax outlines. If the government outlines the rules around setting up, operating and getting REITs listed, many funds including some domestic ones could raise capital through this route.
According to experts, the initial lot may face a lot of challenges while entering the segment. "Listing of new REITs will be slow and steady. While REITs will succeed over the longer term, they need to pass through the challenging phase ahead for them over the next two years," said Anuj Puri, chairman and country head of real-estate consultancy Jones Lang LaSalle India.