The largest Indian realty firm seeking to list a Reit structure in the Lion City is also the country’s leading listed property firm. Delhi-based DLF is putting together a $1.5 billion Reit that is set to complete its Singapore initial public offering in the second quarter of this year, despite, in the words of one investment banker, “just truly appalling market conditions”.
Two other domestic firms are also lining up to sell shares to global investors via Reit structures on the Singapore bourse.
Unitech, which is also listed on London’s AIM, plans to raise upward of $700 million via a Singapore listing. The Indian company has not yet finalized its plans but it is expected to suck several large land banks into its new structure, named Unitech Office Trust, including six information technology parks and special economic zones dotted around India, with a total leasable area of more than 10 million square feet.
Finally, there is Indiabulls Real Estate, one of the country’s youngest but fastest-growing property firms. The company, which also runs a hugely successful financial services division, is seeking a Singapore listing by mid-March of its recently created division, Indiabulls Properties Investment Trust (IPIT). The Reit by IPIT is excepted to raise about $1.2 billion for Mumbai-based Indiabulls, which was founded in 2000 with the aid of a loan from Indian billionaire steel magnate Lakshmi Mittal. Several of the company’s flagship Mumbai properties, including One Indiabulls Centre and Elphinstone Mills, in the heart of India’s financial capital, will be sucked into the new structure. The two properties, in which Indiabulls holds a 40% stake, are valued at $2.2 billion.
Indian domestic property firms are hungry for capital as they seek to benefit from the country’s enormous demand for top-notch residential, commercial and industrial property. Global property funds, meanwhile, are keen to profit from India’s construction boom. A Singapore Reit offers one of the few ways to play the Indian market: foreign real estate firms (including funds) are banned from owning finished buildings directly in India. Singapore is also a hugely attractive market for the country’s property firms: 10-year bonds trade in the market at just 2.3%, compared with 7.5% in India.
The three firms seeking succour from Singapore’s capital markets wouldn’t be the first to list a Reit there. That honour goes to Ascendas India Trust (AIT), a division of Ascendas, itself a division of Singaporean industrial landowner JTC Corporation. AIT in January 2007 sold $356 million-worth of shares in its Reit, which was based on several business parks based in three first-tier Indian cities: Bangalore, Chennai and Hyderabad.
India’s faltering attempts to create a workable domestic Reit market have so far failed, thanks largely to a lack of regulatory and political will. In December 2007, the Securities and Exchange Board of India (SEBI) rolled out draft guidelines for local real estate investment trusts – thereby suggesting that the regulatory body was expected to oversee the first onshore Indian Reit during 2008.
All eyes will now be on India’s 2008 budget, which was delivered as Liquid Real Estate went to press. If there is a mention in that document of tax breaks relating to the property trust market, there’s every likelihood of an onshore Indian Reit market being created in 2008. If not, local Indian investors might have to wait another year before buying into the first local real estate investment trust.
