REITs, InvITs gain traction; mutual funds invest Rs 9,000 cr during Jan-Sep

Emerging investment instruments -- REITs and InvITs --seem to be finally catching on with investors as mutual funds have invested nearly Rs 9,000 crore in such units in the first nine months of the year.

Fund managers have infused Rs 451 crore in real estate investment trusts (REITs) and Rs 8,528 crore in infrastructure investment trusts (InvITs), according to the Securities and Exchange Board of India (Sebi).

Mutual funds have increased their exposure in these investment avenues over the past nine months. The investment by fund houses in REITs jumped to a staggering Rs 69 crore in September from a mere Rs 7 crore in January, while the same in InvITs rose to Rs 1,034 crore in September from Rs 611 crore in January.

Market experts believe that REITs could be a potential investment option giving good returns as interest of investors in the residential segment is declining due to inability to monetise assets and limited appreciation in property prices.

They further said that investment in InvITs may pick up in the coming month as recently the Reserve Bank allowed banks to lend to InvITs.

Recently, Sebi Chairman Ajay Tyagi, who met scores of foreign investors in the US, witnessed a keen interest among them for REITs and InvITs.

During the meeting, the participants were enthusiastic about emerging areas such as REITs and InvITs, which have more than USD 10 billion asset size as on today".

The markets regulator first issued the guidelines for REITs and InvITs in 2014, which were then revised in 2016 and 2017.

However, mutual funds, which are investment vehicles made up of a pool of funds collected from a large number of investors and invest in stocks, bonds, money market instruments and similar assets, have been allowed to invest in REITs and InvITs in February 2017.

The move was part of the markets watchdog Sebi's effort to get more number of investors into such instruments.

Under the norms, a mutual fund has been permitted to invest only up to 5 per cent of its net asset value in units of a single issuer of alternative securities. The maximum allowed investment in alternative instruments by a single fund has been capped at 10 per cent.

Ever since Sebi introduced InvITs, markets witnessed the listing of two public InvITs -- IRB InvIT Fund and India Grid Trust -- while three InvITs -- IndInfravit Trust, India Infrastructure Trust, Oriental InfraTrust --- were privately placed. On the other hand, Embassy Office Parks REIT is the only listed real estate investment trust.