Regulatory Official Says India Has Elements of a Thriving REIT Market
06/27/2016 | by Allen Kenney

Sunder Raman, whole time member of the Securities and Exchange Board of India (SEBI), joined REIT.com for a video interview during visit to NAREIT headquarters in Washington, D.C.

Raman’s position with SEBI is equivalent to a commissioner with the U.S. Securities and Exchange Commission. He was part of a delegation from SEBI that met on June 22 with senior NAREIT executives to discuss the ongoing development of the Indian REIT market.

Raman said evaluating different REIT regimes around the world has posed the greatest challenge in creating Indian REITs. The country’s policymakers have studied different REIT markets in search of “best practices” that can be applied to its new REIT rules.

Additionally, the architects of Indian REITs faced challenges in terms of determining appropriate tax rules for publicly traded real estate companies, according to Raman.

“Now, we are in a position where the regulatory framework is in place and the taxation issues have all been dealt with,” Raman said.

Raman also discussed the parallels between the Indian REIT rules and the U.S. REIT model. Among them, Indian and U.S. REIT rules require similar levels of investment in real estate for companies to qualify as REITs. Furthermore, the REIT rules in both countries require that qualifying companies pay at least 90 percent of their taxable income in the form of shareholder dividends each year.

In contrast, Raman noted that the majority of U.S. REITs are internally managed, whereas Indian REIT rules call for external management as of now. Currently, the Indian market is “very happy” with externally managed REITs, according to Raman, who pointed out that estimates show the size of the REIT market in India is projected to reach approximately $20 billion in “two to three years.”

Raman said Indian authorities have received feedback suggesting that policymakers consider allowing internal management. “We are not averse to that at all,” he said.

In sum, the India possesses the three elements of a fully functioning REIT market, according to Raman: “There are investors, there are developers and there is a good stock of REIT-amenable assets... We see a good future for the sector.”