India has taken a step closer to adopting a real estate investment trust (REIT) sector.

The Securities and Exchange Board of India (SEBI) is expected to finalise the rules governing the sector in the coming weeks.

The SEBI has begun a public consultation on India’s REIT sector to clear hurdles standing in the way of making REITs a reality in India, analysts said.

Peter Verwer, chief executive of the Asia Pacific Real Estate Association (APREA), told IPE Real Estate “all the technical barriers have been, by and large, removed”.

He said the latest moves were “extremely positive” and showed the government’s “willingness to champion a REIT model in India”.

The new rules – called “norms” in India and to be finalised within the next few weeks – pave the way for a “breakthrough for REITS” in India, he said.

In what is seen as the first step towards rolling out a REIT framework aligned with global standards, Indian finance minister Arun Jaitley announced in February that the vehicles would be exempt from dividend distribution tax (DDT).

The latest SEBI proposal includes a comprehensive set of reforms, all aimed at creating a viable REIT framework.

It includes increasing the number of sponsors from three to five, increasing the investment threshold for development projects and boosting allowable REIT investment in development projects from 10% to 20%.

The blueprint allows REITs to invest in other REITs and hold shares in other listed or unlisted REIT entities, and streamlines third-party transactions.

More important, it liberalises public holding requirements – a stepped public offer trajectory of 10% is proposed rather than an initial 25%. 

In addition, SEBI has also proposed changes to existing regulations, allowing foreign fund managers to relocate to India.

Together, the new rules would help popularise REIT listings in India, Verwer said, adding that the country had a significant portion of REIT-able assets, as well as a growing middle class with varied investment needs.

Verwer said “there are already several IPOs in the pipeline” and that a “handful of them are currently being assessed by SEBI”.

The REIT framework would also push Indian developers to pursue an “asset-light” strategy, he said.

Analysts believe the biggest beneficiary of the new REIT regime would be companies with large real estate portfolios, such as Blackstone, Raheja and RMZ Group.  

Given the domestic regulations, or lack thereof, several Indian developers – such as Ascendas and Indiabulls – have in the past gone to float REITs in Singapore, seen as having one of the best REIT frameworks in the region.

More attractive domestic regulations are now expected to keep those in India.

India is expected to have its first REITs by 2017, with first listings expected to be infrastructure trusts and first real estate listings expected to be office assets, according to APREA.

The industry body recently organised a road show of Indian SEBI regulators in New York, Washington, Toronto and London to brief investors.