A new set of rules may soon be announced by the regulator which would make it easy for wealthy Indians and international investors to buy into these trusts that provide regular income like bonds or bank deposits, said two people familiar with the development.
“We are working on a new set of guidelines that will be attractive to FIIs,” said a person at the market regulator who did not want to be identified. But it will be out of bounds for retail investors since the relaxed guidelines will be a risky proposition for them, he said.
Indian regulators are looking to re-draft the Real Estate Investment Trust, or REIT, guidelines to draw foreign investment to shore up the rupee. The initial guidelines announced in 2006 were so onerous that not a single trust was founded. One of the conditions was that the trusts have to declare the net asset value on a daily basis, a requirement quite impossible in thereal estate market where similar properties do not trade on a daily basis.
REITs are a pool of funds raised by issuing a tradable security like a share or a debenture. The value of a REIT is dependent on the rental income from the properties that are owned by the REIT as a whole. This is one way of real estate investment for higher yields for small investors who cannot spend crores of rupees buying property.
The Indian currency is among the worst performers among emerging markets as foreign investors pulled out more than $6 billion amid fears that the Federal Reserve chairman Ben Bernanke will end the $85 billion monthly bond purchases that helped global stocks rally.