It is therefore imperative that the sector focuses on reforms-driven agenda and bring back the demand for housing. This can happen if there is timely delivery of projects and financing available for construction. And REITs have the potential to provide the required funding. "As stakeholders in the sector, we need to take control of a few things. Bringing some financial discipline will help the sector revive the growth. As the sector companies currently have over-exceeded their requirement of debt, banks have reduced their lending. A number of companies operating in the sector do not have the capacity to take any further loans as they have over-leveraged the bank funding," said Arun Nanda, Director, Mahindra & Mahindra Ltd. and Chairman, Mahindra Lifespace Developers Ltd., addressing the conference.

Commenting on the implementation of REITs, he added, "If REITs sees the light of the day, it will help the country to attract more foreign investments and domestic funding. However, we need to resolve the issue of double taxation as proposed in the consultation paper on the draft SEBI (Real Estate Investment Trusts) Regulations, 2013. Otherwise, it will invite more litigations."

Anshuman Magazine, CMD, CBRE South Asia, and Chairman, RICS South Asia Board, said, "REITs will provide an exit to a lot of funds that are planning to invest in the Indian market. In Asia Pacific alone, around $ 200 billion of REITs money is available. This can come into India, provided we give them an enabling environment."

Experts added that the implementation will require the adoption of international standards for evaluating the asset value for the computation of returns.

The market will also need other factors in addition to REITs to recover from the current slump, added the experts. "High inflation, large budget deficit and the slow pace of regulatory reforms are weighing down business sentiment. The proposed regulations need to be implemented soon to revive the sentiments," said Sachin Sandhir, MD, RICS South Asia.

In a press release, Ganesh Vasudevan, CEO, IndiaProperty, said "With evolving business dynamics leading to an increase in demand for office space, malls, warehouses and large, spaced-out residential enclaves, the sector's inventory has improved both in terms of quality as well as depth. We have seen many developers now putting in place sound strategies to build a healthy spread of both commercial as well as residential projects."

The advent of REITs in the market will allow the sector to have access to a large and healthy source of funds. It will provide the sponsor (usually a developer or a private equity fund) avenues of exit, thus providing liquidity, and enable them to invest in other projects. Post clarity and implementation one can expect participation from large corporate entities.

The REITs may raise funds from any investors, resident or foreign, but initially till the market develops it is proposed that the units of the REITs may be offered only to HNIs/institutions.

As of now the funds would be allowed to invest up to 90 per cent of their corpus in completed, revenue generating real estate assets and distribute 90 per cent of the earning among their investors. It is also proposed that the minimum subscription size shall be Rs. 2 lakh and the unit size shall be Rs. 1 lakh.

With this an investor today will have an opportunity to participate in market returns from this sector backed by professionally managed, strictly governed, high return associated managers.

The move by SEBI to bring out a draft paper on introduction of REITs is certainly welcome. Once it becomes a reality, it would help investors attain flexibility and liquidity in terms of real estate investments. The REIT units would become tradable like securities and the regulator has recommended enough checks and balances to ensure transparency and safety. However, whether the market laps it up when it is launched is dependent on the net returns.

Given the restrictions SEBI has placed in its draft proposal, it may not give a huge fillip to builders who have property under construction. One of the primary requirements of REIT investments is that the project needs to be completed or be nearing completion and should be able to provide rental returns, right from the start. And I see this not going beyond commercial real estate in the first couple of years, which is probably also the intention of SEBI because that is where ready rental income can be tied up. But I think a far greater impact can happen to the housing sector, if REITs can also invest in residential property.