INDIA - Moody’s has urged the Indian government to push forward a regulatory and taxation framework allowing that market to introduce real estate investment trusts (REITs).
In a research paper published last week, the ratings agency suggested the introduction of REITs was overdue given hey had become the "brand name of choice" f0r investors in other markets.
Report co-author John Kriz, Moody’s managing director of real estate finance, said:
"REITs are an easy way to invest because they’re liquid and transparent. They’re a core characteristic of modern economies. A number of countries should introduce them. India is one of them."
He suggested a number of recent initial public offerings (IPOs) of Indian property companies had demonstrated the "vibrancy" of the sub-continent’s real estate market.
"The question is whether the government wants to take the next step," he said.
Kriz was undaunted by the poor reforming record of the current and previous governments, although in a press statement Moody’s acknowledged "the road would be long" and "the property industry's transparency and disclosure levels could be improved".
More broadly, Kriz told IPE Real Estate India’s continued economic growth will depend on a real estate infrastructure.
"There’s a recognition that the economy needs to have modern office, industrial, hotel and retail in order to develop. It’s a question of how the system can be arranged," he said.
REITs are unlikely to alter the trend to date for international direct investors who focus on major cities.
"It’s only local sharp-shooters targeting secondary and tertiary cities," said Kriz.