Sunday Nov 24, 2024
Sunday Nov 24, 2024
Wednesday, 9 December 2015 00:00 - - {{hitsCtrl.values.hits}}
Further to the article on REITs, which were covered in exhaustive detail by Naushervan Beg, CEO, Entrust Wealth Management and Entrust Capital Markets, in the Daily FT of 13 October, it is extremely heartening to note that the Finance Minister made specific reference to its potential introduction into the investment mainstream in his Budget speech.
A key element of the Budget speech in reference to REITs was the waiver of Stamp Duty under special conditions. This indeed would be a significant boost to its viability as an alternative investment class and an aspect that would have significant ramifications, in a positive sense.
A key beneficiary to the introduction of REITs would undoubtedly be the Government itself, despite the seeming paradox of the waiving of stamp duty. It would be an ideal vehicle to spur development activity in alignment with the Government’s espoused policy vis-à-vis the Megapolis.
Therefore, whilst some analysts with a more myopic perspective may dwell on the potential loss of tax revenue in the immediate aftermath of its introduction, it is the fervent hope that others would reflect on the potential long term benefits of its introduction, none more so than its potential to finance the massive infrastructure that is needed in order to take Sri Lanka to the next phase in its development.
Of course, it would remiss not to mention the benefits that would accrue to the smaller investor, for so long deprived of investment into an asset class that most HNWIs and institutions consider integral to a diversified investment portfolio. One could extend this list of beneficiaries to encapsulate;
Banks and financial institutions, who could free up much needed liquidity by transferring their existing land banks to REITs;
Real estate developers, who could avail themselves of a new funding mechanism, instead of the traditional reliance on the banking sector;
FDI, given that REITs provide a much more transparent investment instrument/mechanism, especially in the case of listed REITS and foreign investors are particularly sensitive to the level of transparency in making investment decisions;
Capital market players, which would include investment banks et al;
The CSE, which would provide the platform for the product to be listed.
The above is by no means an exhaustive list and there are various other interested parties and service providers, such as rating agencies, which would welcome this addition.
The subject of REITs, in the aftermath of the Budget, will be the topic of a discussion where market experts would deliberate on at a presentation and panel discussion titled ‘Creating the Real Estate Infrastructure to spur Economic Growth’ to be held on 11 December. More details could be obtained via email [email protected] or call 0775837575.
