Blackstone, Embassy likely to set up India's first real estate investment trust

The Blackstone Group and its local partner Embassy Group are likely to set up India’s first real estate investment trust (REIT) and list it in on domestic exchanges next year.

“We have already started the ground work. We were waiting for some positive steps from the government. We are evaluating all the regulatory issues and are hopeful to get some clarity on it by next year,” said Embassy Property Developments Chief Executive for Commercial Real Estate Division Michael Holland. He said his company expected more clarity on these issues, including exemption from capital gains, tax among other issues after the next Budget.

Embassy and Blackstone have a joint portfolio of over 16 million square feet of office space in Bangalore and Pune. “We wish to increase the portfolio to 30 million sq ft by looking at assets in the top five metros. We may consider this portfolio that is likely to have a value of $2 billion on the stock exchanges. Further, listing here makes more sense for our investors here,” he said.

He said both the companies are currently working towards meeting challenges on the operational and regulatory fronts.

In his Budget, the Union Finance Minister had announced REITs as a pass-through entity and other incentives for it, including exemption form long-term capital gains tax.

A REIT is a company that, in most cases, operates income producing real estate properties by pooling in money from several investors. It is a pass-through entity which does not have to pay corporate tax. The government had issued draft regulations for REITs way back in 2008, but was forced to shelve plans after the global financial crisis dried up investor interest and an economic downturn dimmed outlook for real estate investments.