Following the footsteps of developed economies and the deeper bond markets where investors can identify risks and returns across infrastructure asset classes, both sources of funding are gaining currency in India, and stable regulation sets this goal. It’s important to achieve.
The government task force estimates that by fiscal year 2025, the infrastructure will require an investment of Rs 11.1 billion. This is twice as much as the last five fiscal years. This is a huge investment need that cannot be met by government and traditional infrastructure lending channels alone. Therefore, alternative channels need to be put into service, rating agencies said.
InvITs and REITs play an important role here, as they have now recorded a compound annual growth rate (CAGR) of 42%, up to nearly two rack chlores since the launch of the first InvITs in 2018. I can.
“Investing under InvIT and REITs is a valid regulatory framework, adequate availability of operational infrastructure 2 and real estate assets, and willingness from domestic and foreign investors considering investing in high yield bonds. The rise could add another 80,000 rupees over the next five fiscal years-yield assets, “said senior director Manish Gupta. CRISIL Evaluation.
There is also regulatory support, such as leverage caps and permission to invest in assets under management. The regulation also sets a threshold for the AAA rating of listed InvITs, among other conditions, when the debt-to-AUM ratio exceeds 49%, which reduces credit risk. In addition, the compulsory distribution of surplus cash also increases investor confidence.
Currently, there are 11 InvITs and REITs in India. Ten of these credit ratings indicate the highest level of security (AAA) for three reasons. That is, less debt, less than 35% of total debt to AUM, and more than 90% of AUM in assets under management.
Regulations are driving a reduction in leverage in most situations, but this will change. Recent rules do not allow you to set up an unlisted private InvIT to leverage, cap your rating, or curb your investment in assets under management.
This can increase credit risk to some extent, but it can still support overall market development. Such InvITs are creating more and more investor interest given the flexibility offered and the opportunity to balance the interests of lenders and investors.
According to CRISIL, even low-rated InvITs and REITs are accepted around the world. For example, 12% of S & P Global rating REITs in the United States are in the “BB” category and 77% are in the “BBB” category. Indeed, these ratings are based on bank loans or debt certificates, indicating the possibility of timely payment of debt based on the rated products, and anyway about potential returns to debt-dependent investors. It is not a comment of.
As markets expand and regulations are released, things change and we need to make a clearer distinction between InvIT and REIT credit risk and operational risk.
InvITs and REITs have the potential to emerge as important tools to meet India’s huge infrastructure financing needs. Depth of fixed income markets, a deeper understanding of operating and credit risk between investors and unitholders, and stable regulation are essential to achieving the expected growth.
REITs: InvITs, REITs can raise capital of Rs 8 rupees over the next 5 years: CRISIL rating
https://economictimes.indiatimes.com/markets/stocks/news/invits-reits-can-raise-rs-8-lakh-crore-capital-in-the-next-5-years-crisil-ratings/articleshow/80498180.cms REITs: InvITs, REITs can raise capital of Rs 8 rupees over the next 5 years: CRISIL rating