Mindspace Business Park REIT Files For IPO
Blackstone and K Raheja-backed Mindspace Business Parks REIT has filed draft papers with the market regulator to launch an IPO on December 31, 2019. This would the second REIT in the country after Embassy Office Parks launched its first real estate investment trust (REIT) in India.
According to the documents submitted to the Securities and Exchange Board of India, Mindspace REIT will raise Rs 1,000 crore through issue of fresh shares while partners K Raheja and Blackstone will offload some of their existing share through an offer for sale.
The issue is likely to be listed by the end of the second quarter of 2020.
The portfolio listed under the REIT includes Grade- A office spaces in Mumbai, Pune, Hyderabad, Bengaluru and Chennai and will be managed by 13 investment bankers, including Kotak Mahindra Capital, Axis Capital, Citigroup and JM Financial.
In 2017, Blackstone acquired 15 per cent stake in K Raheja Corp’s commercial office portfolio, the second-largest developer of office spaces in India. Looking at the positive response to the first REIT, other players are considering this avenue to monetise their holdings.
REIT Makes India Debut: All You Need To Know
Update on April 1, 2019: World’s largest alternative asset manager Blackstone Group's Indian partner real estate major Embassy Group became the second-most valuable real estate company in India on its stock market debut, following its initial public offering for India's first real estate investment trust (REIT) that was launched on March 18. The three-day offer that ended on March 20 saw robust demand and was subscribed 2.58 times on the final day of bidding. The company raised Rs 4,750 crore through the issue of units at Rs 300 a piece. Embassy is likely to reduce its debt by 85 per cent after the issue.
REITs are entities that will own and operate commercial real estate by pooling in money from various stakeholders. Quite similar to mutual funds, REITs are traded on stock exchanges. And, unlike stock investments, long-term investments are expected to earn much higher.
It was in 2014 when the government announced the rules for the launch of REITs in the country. A cold response by market players led to the Centre announcing several perks in this period to encourage investors. The Embassy Office Park REIT is expected to unlock an important source of capital for Indian real estate developers from a global REIT industry, which according to an Ernst & Young report, stood at $1.7 trillion in 2016.
Under the REIT is listed 33 million square foot (sqf) of marquee office space with tenants such as Microsoft, Rolls Royce, IBM and Google. It includes properties from the joint venture as well as from Blackstone’s own portfolio. The partners aim to add another 50 million sqf in their portfolio in future.
How to invest
To invest in REITs, you need to have a DEMAT account through which you can choose the IPO. Fill the complete form and mention the DEMAT account number and code. The investor needs to bid for a minimum of 800 units and in multiples of 400 units thereafter. To be listed on National Stock Exchange and Bombay Stock Exchange, 25 per cent of the issue is available for non-institutional investors. At a price band of Rs 299 to 300, Embassy REIT will issue units aggregating up to Rs 4,750 crore. The minimum amount for investing in this REIT is Rs 2.4 lakh.
Investors should know that it is not an equity fund and should have minimum three-year holding story. From taxation point of you, if you hold units for more than three years, long-term capital gains will be applicable. If you sell it before three years, short-term capital gains will be applicable on appreciation.
How it is different from owning a physical commercial property?
In direct real estate investment, you own just one property, there is no diversification and it is an illiquid investment. In REITs, you sell units on exchange and it is more liquid than physical investment. Also, the yield is expected to be more in case of Embassy Office Parks REIT as compared to personal investment.