REITs in India

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GOI allows REITs in India

Ever wondered how you can participate in the rise in value of Real estate without actually owning it? Real Estate Investment Trusts(REIT) are one such vehicle. Many countries have REITs and India has just announced that it too will allow the formation of REITs. The Securities & Exchange Board of India (SEBI) approved the setting up of REITs in India through an order on August 10. Though this took a long time in coming, SEBI also relaxed the restriction on the Asset values from Rs. 1000 crores ($167M) to Rs. 500 crores ($83M). Before we examine India's REITs in depth, here is a quick look at how REITs are structured in US, UK, Japan, Hong Kong and Singapore... All five countries required that REITs must distribute at least 90 percent of their taxable income to its shareholders annually. In most countries, REIT income is not taxed at the corporate level and taxes are only payable at the investor level. A brief explanation on the table below. The first column if clicked on, leads to REIT rules and insights of the country. The second column shows information on a significant REIT of that country and the third column shows its Ticker symbol and details in one of the financial sites.

Country

Description

Ticker

REIT
Annaly Capital Management, Inc. (Ticker: NLY) is the bellwether stock for the US REIT market, giving dividends in excess of 10% for the past several years.
NLY
REIT
The largest REIT in UK is Land Securities (LSE:LAND) holding a mix of office, retail, and residential properties.

UK is trying to lower its tax base to attract more investment into its REITs.

LSE:LAND
REIT
J-REITs or Japan Real Estate Investment Trust was introduced in 2000. Global Logistic Properties (MC0.SI) J-REIT is one of the largest REITs in Japan holding a mix of logistics facilities.

J-REITs have had mixed success in attracting foreign capital.

MC0.SI
REIT
Hong Kong allowed setting up of REITs in 2003 and The Link REIT (0823.HK) was the first one to get listed in 2005.

Link returns 100% of its income back to the investors!

0823.HK
REIT
Singapore is considered the best REIT option among South East Asian countries. Fraser Commercial Trust (FCOT:SP) is one of the biggest S-REITs.
FCOT:SP

A quick look at the above table tells us that a new country offering REIT needs to be better than the most successful REIT in its region (meaning Singapore) in order to attract capital inflows. This is for the Global investor such as Hedge funds, CALPERS, PIMCO etc. Digging a bit deeper, we find that S-REITs (Singapore based REITs) returned on an average 7.7% in 2014. So India based REITs (let us call it I-REITs) will have to offer something significantly higher. But this may not be difficult since core interest rate is close to 8% and is expected to stay put for the foreseeable future. The new government led by Narendra Modi needs money to build its dream of 100 Smart cities and see REIT as one way to finance it.

SEBI published a Consultation Paper in 2013 on how it would like to see REITs operate. Initially it will be open to High Networth Individuals and institutions only, with a minimum lot size of Rs. 1Lakh ($1650) and subscription size of Rs. 2Lakhs ($3300). Leverage is being set to not exceed 2X. While full clarity on taxation issues for REIT listings is yet to emerge, large scale developers are in a wait and watch mode. The potential for REITs in the 7 metropolitan cities is as much as $10B-$12B and it is expected that in about 6-9 months, you will start seeing REIT listings. Here is a short list of movers and shakers in this field:

Partners

Description

Blackstone Group - Embassy Property Developments
Embassy Property Developments owns a significant amount of rental property in the Bangalore metro area and is hoping to expand its operations with cash infusion from Blackstone Group.
RMZ - Qatar Investment Authority
RMZ is looking to expand its acquisitions in Mumbai and NCR (National Capital Region of Delhi).

Once SEBI finalizes the tax code plus weigh in on whether individual NRIs with High Networth will be allowed to invest, things will start heating up. It is widely believed that a lot of Black money is in India's Real estate. REITs can bring about a transparency in the market thereby making it easy to value fairly and create confidence in the minds of investors. It will also bring down the price of housing for the common man. For further reading, here is an excellent White Paper from KPMG.

Micropreneur

How to succeed as a Micropreneur

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A micropreneur or microbusiness is one that operates on a very small scale, or one with no more than five employees. When you are starting out, you are pretty much everything for the company (CEO to CJO - Chief Janitorial Officer). You have to buy your own stationery, printer cartridges, SD Cards (for the Security Cameras), manage your website, make coffee, spruce up the meeting room, attend to calls... I can go on. The seed capital (your savings) runs out faster than a speeding bullet with a thousand things screaming for your attention and you feel like you are juggling many balls in the air. Prioritize, prioritize, prioritize you tell yourself. As things slip, there is a feeling that you are unable to keep up. But do not despair! You have to address the following four items no matter what business you are in (Health Care to Personal Care, Wall Street to Main Street)...

Item

Description

Useful Tools
These set of tools will make you appear bigger and smarter!
REIT
27 eCommerce blog sites and what they excel in.
SEO
Drive more traffic to your site using these techniques...
Media
How to use Social Media to promote your products...

In the limited time you have in a day, you have to be able to ensure that you are able to keep your site updated with new content as often as you can, blog about it on social media, have back end setup to handle the traffic your posts on Social media are going to generate, sell your product to your customers, follow up with existing customers on new offerings.... let me take a breath here!

As you start getting traction, you will find an Angel investor or Venture Capitalist (if you can make them believe in your vision) or you will bootstrap your way to grow your business. There are also other viable alternatives such as Micro financing that can help you to grow. There is no fixed formula here - you choose the method that you are most comfortable with.

UK raises its security threat level

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Britain has just announced that there is imminent danger of an ISIS sponsored attack on either England or the Western hemisphere. Gauging by the events that have been unfolding, let us try and list what factors influenced this decision by UK.

Tax Inversion

Tax inversion and how it affects us

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Tax inversion can be defined as re-incorporating a company overseas in order to reduce the tax burden on income earned abroad. USA today captured all the different ways US based companies try and reduce their tax burden in this article. Yevgeniy Feyman in Forbes argues that like water finding a lower level, companies will do what they feel is best for their shareholders. The following picture explains how corporate taxes fare in the US in the group of OECD (Organization for Economic Cooperation and Development) countries. The explanation of OECD Weighted average and average is available in this article.

How US compares with other OECD countries

Does Congress/ Senate have the political will to draft a more attractive tax legislation that will put US on par with other OECD countries? Not in a mid-term election year. So what can the government do to make people aware of this? I have a simple suggestion - Make all US companies mention the country of incorporation in all its releases and advertisements. Let the people decide if they like to buy the company's products or not. Something along the lines

Inc. in United States

But the long term solution is not so easy to arrive at. Many OECD countries have switched away from worldwide taxation (US still does) and addressing this is one way forward. It is important to remember that Tax inversion only affects profits earned outside of US. One of the biggest expense items in a company's operation is its payroll. Many experts have weighed in that US continues to attract top talent from the whole world and therefore companies will invest in the US for staying on the cutting edge and hence Tax Inversion does not make a difference in the long run. They go on to argue that thanks to outsourcing and globalization, every possible task that can be outsourced has already been done and then some. While reforming Corporate Taxes, US Govt. should also encourage giving tax breaks to companies for creating jobs in the US. These are in place as a temporary measure but should be made permanent.

List of Patents

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Patent

Description

US 9,558,135
Flashcard reader and converter for Serial and Parallel Flashcards
US 8,337,252
Smartconnect flash card adapter
US 8,230,207
System and Method of providing security to an external attachment device
US 8,011,964
Smartconnect flash card adapter
US 7,876,894
Method and system to provide security implementation for storage devices
US 7,719,847
Smartconnect flash card adapter
US 7,620,844
Field-operable, stand-alone apparatus for media recovery and regeneration
US 7,597,268
Memory module which includes a form factor connector
US 7,526,675
Software recovery method for flash media with defective formatting
US 7,508,659
Flash media reading devices with integrated storage compartments
US 7,493,437
Flashtoaster for reading several types of flash memory cards with or without a PC
US 7,412,552
Flashtoaster for reading several types of flash memory cards with or without a PC
US 7,383,386
Multi partitioned storage device emulating dissimilar storage media
US 7,295,443
Smartconnect universal flash media card adapters
US 7,278,051
Field-operable, stand-alone apparatus for media recovery and regeneration
US 7,252,240
Memory module which includes a form factor connector
US 7,222,205
Flashtoaster for reading several types of flash memory cards with or without a PC
US 7,162,549
Multimode Controller for intelligent and DumbĀ Flash Cards
US 7,095,618
Smartconnect universal flash media card adapters
US 7,093,161
Software recovery method for flash media with defective formatting
US 6,976,623
Flash Juke Box
US 6,932,275
Frame kit to accommodate multiple host processing system connector interfaces
US 6,903,727
Integrated virtual hub chip
US 6,859,369
SmartConnect Universal Flash Media Card Adapters for CF/PC Card Form Factor
US 6,859,361
Flash media reading devices with integrated storage compartments
US 6,839,864
Field-operable, stand-alone apparatus for media recovery and regeneration
US 6,832,281
Flash Toaster for Reading Several Types of Flash-Memory Cards With or Without a PC
US D491,187
Storage Reader Connector
US 6,438,638
Flash Toaster for Reading Several Types of Flash-Memory Cards With or Without a PC
US 6,006,295
Translator with selectable FIFO for universal hub cables for connecting a PC's PCMCIA or parallel ports to various peripherals using IDE/ATAPI, SCSI, or general I/O
US 5,905,888
Bootable redundant hard disk attached to a PC's parallel port with rom-address auto-detect and configure during BIOS scan
US 5,768,627
External parallel-port device using a timer to measure and adjust data transfer rate
US 5,623,274
Front-panel indicator using a serial link for a PC
CH ZL01815216.3
Flash Toaster for Reading Several Types of Flash-Memory Cards With or Without a PC
SK 476817
Flash Toaster for Reading Several Types of Flash-Memory Cards With or Without a PC
TW I222564
Flash Toaster for Reading Several Types of Flash-Memory Cards With or Without a PC
TW I238578
Flash Toaster for Reading Several Types of Flash-Memory Cards With or Without a PC

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