REIT: New Way To Invest in Real Estate

On 10 October 2013, the Securities and Exchange Board of India (SEBI) issued draft Real Estate Investment Trusts (REITs) Regulations, 2013. REITs pool investment, like a mutual fund, but invest primarily in real estate of completed and revenue-generating properties. The rentals received from these properties are distributed among investors as dividend. Each investment in real estate is large. REITs are a means for people to invest smaller amounts in real estate and also achieve portfolio diversification.

SEBI has mandated that at least 90% of the value of an  REIT’s assets shall be in completed revenue-generating properties. No REIT will be allowed to invest in vacant or agricultural land or mortgages other than mortgage-backed securities. To provide flexibility, REITs can invest 10% in other assets as specified in the proposed regulations—under-development properties, listed or unlisted debt of companies, mortgage-backed securities, equity shares of companies deriving not less than 75% of their revenue from real estate activities, government securities, money market instruments or cash. It has been specified that the size of assets under management of the REIT should not be less than Rs1,000 crore. An REIT can invest its entire corpus in one project only if the size of the project is at least Rs1,000 crore. For investors, minimum subscription shall be Rs2 lakh while the unit size shall be Rs1 lakh.

Not less than 75% of the revenues of the REIT, other than gains arising from disposal of properties, shall be from rentals, leasing and letting out real estate assets, at all times. To ensure regular income to investors, at least 90% of the net income after tax has to be distributed to the investors.

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Payment System: ‘New RTGS system to improve financial market efficiency

RBI governor Raghuram Rajan said the new real time gross settlement (RTGS) system for fund transfers will improve the efficiency of the country’s financial markets. “With its advanced liquidity and queue management features, the new RTGS system is expected to significantly improve the efficiency of financial markets,” Dr Rajan said.

The RTGS system is used to settle inter-bank fund transfers and is critical in facilitating orderly settlement of payment obligations. It will have features such as a facility to accept future value dated transactions and options to process multi-currency transactions.

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Jignesh Shah resigns from MCX

Jignesh Shah’s resignation leaves MCX in the hands of all non-promoter and nominee directors

Jignesh Shah, the promoter of Multi Commodity Exchange of India Ltd (MCX), the country's largest commodity exchange, has resigned as non-executive chairman of the Exchange. Last week, the Board agreed to give Mr Shah more time (to step down) till the Forward Markets Commission (FMC) takes a decision on this matter. Mr Shah’s resignation also means that MCX would now have 10 appointed or nominated directors out of 11 members, who are non-promoters. Mr Shah has lost control over the company that he created, at least for now.
 

His statement shows that he thinks he has lost control over the company forever. Mr Shah is founder chairman, managing director and chief executive of Financial Technologies (India) Ltd, the main promoter of MCX. In a release, he said, "I wish the very best to the management and Board of MCX for future. I hope that they will do justice to the growth opportunities ahead of them and I will see the institution grow from a distance for the rest of my life." he added.
 

Mr Shah admitted that "The National Spot Exchange Ltd (NSEL) crisis has destroyed everything that I have worked hard to build over past two decades. My loss is not just financial but what has hurt me and my family most is the concerted effort to destroy my credibility and trust for which I have lived by all my life."
 

As reported by Moneylife, following the resignation of Mr Shah, the country's largest commodity exchange would be now run by all nominated directors. This not only raises a big question over the future of MCX but also makes foreign investors to re-consider their decision to stay invested. After all, who would be interested, if there is nobody to grow the company?
 

While commodities market regulator FMC has appointed six directors, the National Bank for Agriculture and Rural Development (NABARD) has nominated one director on the MCX board of 11 members. There are three representatives from banks as shareholder director on MCX board. This includes KN Raghunathan (general manager for treasury at Union Bank of India), Sanjaya Agarwal (general manager for treasury and investment at Bank of Baroda) and P Paramasivam (general manager at Corporation Bank).
 

Except Paras Ajmera, the nominee of Financial Technologies, all other members on the MCX board are nominee directors. This leaves complete control of MCX in the hands of people who are not promoters.

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COMMENTS

pinakin mamtora

4 years ago

We read about Jignesh Shah in the book 'Path breakers' many years back & in 2013, he has 'broken' the 'path' of many investors who had reposed their trust in him. He has lost it all, for some quick crores of other peoples' money.

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