Developer Parsvnath plans to list mall assets as a REIT

By Aditi Shah

MUMBAI (Reuters) - Parsvnath Developers Ltd plans to list its two million square feet of shopping malls as a real estate investment trust (REIT), potentially making it among the first firms in the country to use such a vehicle to raise funds.

Parsvnath, which counts JPMorgan and U.S.-based private equity firm Red Fort Capital among its investors, plans to list the assets in India once the market regulator issues final guidelines on REITs, expected as soon as early next year.

"It is the perfect portfolio that we want for a REIT. We will take a final call once the guidelines are out," Parsvnath Chairman Pradeep Jain told Reuters on Thursday, a day after his company reported a 30 percent fall in net profit for the September quarter.

 

Parsvnath is among several property developers looking for new ways to raise capital to pay down debt and invest in future growth, with bank funding to the sector mostly drying up after slowing home sales hit profitability.

Developers are also burdened by high borrowing costs, inflation and low consumer confidence in Asia's third-largest economy, which is growing at its slowest pace in a decade.

DLF Ltd , India's biggest builder with a market value of $4.5 billion, has said it plans to raise capital by issuing asset-backed bonds as early as end-December to bring down its cost of debt.

In October, India's capital markets regulator issued draft guidelines to set up REITs in the country, reviving an effort it had put on hold in 2008, which would allow developers to monetise their revenue-generating assets by off-loading them in a separate listed entity.

Parsvnath has invested about 5 billion rupees in the 12 malls located at metro stations across Delhi, of which seven are built. Jain expects to earn annual rent of up to 2.5 billion rupees once all the malls are built and leased.

Shares in Parsvnath, valued by the market at $192 million, are down about 31 percent so far this year, outperforming the wider real estate index, which is down 37 percent. (Editing by Mark Potter)