Mumbai: If you are looking for some respite from high property prices, you may have a long wait ahead. Thanks to the proposed entry of real estate investment trusts (REITs), realtors are expecting a further firming up of prices for office buildings, retail outlets (malls and high-street) and high-end residential property.

On Friday, stock market regulator Securities and Exchange Board of India (Sebi) came up with draft guidelines for REITs. Once introduced, small investors will be able to participate in the real estate boom by investing as little as a few thousand rupees in real estate units through REITS. Framing the final guidelines could, however, take up to a year.

So REITs will have to wait till then. Jayesh Shah, chairman and managing director of Naman Developers, says the “introduction of REITs will support the property boom and not bring on another one.” Shah owns several commercial buildings in the Bandra-Kurla Complex. Investors looking forward to investing in REITs can hope for high returns in the initial years – possibly more than 12% per annum. Says Anshuman Magazine, managing director for South Asia at CB Richard Ellis, a real estate consulting and broking company, “As the real estate market in the country is unorganised, one can expect returns of over 12% annually.”

However, he cautions that eventually returns will depend on how individual companies manage their investments. Anuj Puri, chairman & country head, Jones Lang LaSalle Meghraj, too pegged the average returns at about 12% or more. REITs will need properties that have single owners with clear titles. Which is why Ramesh T Jogani, managing director and CEO of Indiareit, real estate fund managers, believes that many REITs may be eyeing the same properties. They would thus be willing to pay a premium to own it. Indiareit is planning to have a REIT of its own. “It is a natural extension for real estate funds,” Jogani says. Jogani feels that owners of commercial properties expect annual rentals in the range of 12% of the property price.

Source : DNAIndia