Prestige Estates is targeting Rs 550-800 crore of rental income and expects valuations to double once REIT gets implemented.
REITs is something which was required for India because a lot of people were trying to list their assets in Singapore and New York
Irfan Razack
CMD
Prestige Estates
The approval to get necessary incentives for introduction of real estate investment trusts (REITs ) is a big move for the industry, says Irfan Razack, CMD, Prestige Estates. According to him, once the grey areas are clarified and REITs becomes a reality, the rental base of the company will generate huge cash flows.
Echoing Razack's views, Pradeep Jain, chairman, Parsvnath Developers also believes that introduction of REITs will be highly beneficial for the sector. "As soon as the final print comes we will be benefited through REIT in terms of the cash flow and projects," he adds.
Prestige Estates is targeting Rs 550-800 crore of rental income and expects valuations to double once REIT gets implemented.
Razack expects REIT to get implemented in 6-9 months.
Below is the transcript of the discussion:
Q: Tell us a little more about real estate investment trust (REIT)? What can be the benefit for your company and what could you financially quantify in FY16?
Razack: It is a big move in terms of REIT approval. The Finance Minister in his speech yesterday said there is going to be pass-over of tax which was required to make REIT into reality. However, still there are a few more grey areas that need to be sorted out like stamp duty and few other things that really need to be looked into. Once that happens and if REIT becomes a reality, this is a sure way of en-cashing and getting value for the rental assets that we have.
Our company itself has a very large rental base and in case we would like to put it into REIT market, it will give us some huge cash flows to develop further commercial assets.
REITs is something which was required for India because a lot of people were trying to list their assets in Singapore and New York. Now if it can be done in India it will boost the production of commercial space, especially IT and retail space. All this can come into the REIT structure and give both the country and our company as well in particular a lot of cash flows.
Q: How beneficial would be REIT for Parsvnath Developers in particular and would you take advantage of the opportunity once there are more clarifications on it?
Jain: REIT is a good introduction through the Budget. We are benefited by large, we have a large portfolio within the city of Delhi, out of our metro stations, we have about 2 million square feet area partially ready partially under construction and development. We will wait till the final print comes. As soon as the final print comes we will be benefited through REIT in terms of the cash flow and projects.
Q: What percentage of your NAV comes from high yielding rental assets?
Jain: The rental assets that we own are largely out of the metro assets. Rest of the assets we have to the model to build and sale. In Delhi apart from the metro stations we have couple of other commercial properties in the Delhi centric which we can look at in time to come to REIT out those assets.
Parsvnath stock price
On July 11, 2014, at 14:13 hrs Parsvnath Developers was quoting at Rs 30.15, down Rs 1.5, or 4.74 percent. The 52-week high of the share was Rs 37.90 and the 52-week low was Rs 22.25.
The company's trailing 12-month (TTM) EPS was at Rs 0.54 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 55.83. The latest book value of the company is Rs 61.61 per share. At current value, the price-to-book value of the company is 0.49.
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