SEBI has allowed real estate investment trusts (REITs) and infrastructure investments trusts (InvITs) to issue debt instruments to raise funds. REITs and InvITs can issue such bonds through stock exchanges.
REITs invest in rent yielding commercial and residential properties to generate regular income while InvITs invest in infrastructure projects to generate income by way of toll.
Many fund houses have started taking exposure to REIT and InvITs as they can invest up to 5% of their net asset value in alternative securities such as REITs and InvITs. With this, fund managers can invest in the bonds issued by REITs and InvITs under their debt portfolio without such restrictions.
We spoke to a few experts to understand the implication of this move on the debt market.
Dwijendra Srivastava, CIO - Debt, Sundaram Mutual Fund
As only the REITs and InvITs that are listed on the exchanges can issue bonds, investors have to see if the issue is attractive for them. If the issue comes with good ratings and offers attractive yields, investors including mutual funds should consider taking exposure to such papers.
Dhawal Dalal, CIO - Fixed Income, Edelweiss Mutual Fund
So far, investors did not have good experience investing in REITs and InvITs. However, once this new asset class takes off, many investors would invest in bonds issued by REITs and InvITs.
R Sivakumar, Head of Fixed Income, Axis Mutual Fund
I do not think that there will be any significant impact. Earlier, the projects were allowed to raise funds via external commercial borrowings but now they can issue bonds. This does not change anything. We continue to remain very cautious on REITs and InvITs investments.
