REITs, InvITs, and Muni-Bonds: The Future of Capital Raising in India
Real estate investment trusts (REITs), infrastructure investment trusts (InvITs), and municipal bonds (muni-bonds) are poised for significant growth in the next decade, potentially surpassing traditional equity and debt markets in fundraising. According t
ReitsInvitsMunibondsCapital RaisingSebiReal EstateJan 10, 2025
These financial instruments have the potential to surpass the equity and debt markets in terms of the quantum of money raised.
Buch highlighted that the overall fundraising from the capital markets, including equity and debt issuances, has surpassed Rs 3.31 trillion in the first three quarters of the fiscal year.
This figure is on track to grow by 21 percent, reaching Rs 14.27 trillion by the end of March, compared to Rs 11.8 trillion in the previous fiscal year.
In the first nine months of the fiscal year, the fundraise has already crossed Rs 3.3 trillion in equity and Rs 7.3 trillion in debt, bringing the total to Rs 10.7 trillion.
Buch emphasized, “Growth is so substantial that it could exceed the capital pumped in from equity and debt markets.
If we leverage the assets we have in this country—both existing and those yet to be built—REITs and InvITs could see their capital double over the next decade.”
While the contribution from REITs, InvITs, and muni-bonds to the overall capital raising is currently small, around Rs 10,000 crore in the first three quarters of FY25, Buch sees tremendous potential for growth.
She believes these fundraising routes can grow significantly over the next decade, potentially exceeding the money raised from equity and debt.
SEBI is actively working to expedite the time taken for clearing fundraising proposals and is committed to reducing the time taken for clearing SME IPO proposals.
Buch noted that SEBI has already reduced the issue aging for IPOs to a world record of three months, and banks like SBI are giving in-principle loan approvals in just 15 minutes.
SEBI is aiming to match and even surpass these efficiencies.
Buch also acknowledged the importance of other avenues for fundraising, such as preferential issuances, institutional placements, and rights issues.
She stated that while SEBI is flooded with new IPO applications, these other routes are crucial and often go unnoticed.
SEBI has introduced a system to expedite rights issuances and hopes the industry will adopt it.
The mutual funds industry has been praised for making the market fair and clean, leading to significant growth.
Buch announced that Rs 250-SIPs (systematic investment plans) will be launched shortly, further democratizing investment.
Highlighting the significant role of the regulator in capital formation, Buch explained that preferential issues and qualified institutional placements (QIPs) are often overlooked but are crucial in the overall capital-raising process.
The bond market, which accounts for almost Rs 60 for every Rs 100 lent by the banking system to corporate India, plays a vital role in capital formation, despite not seeing much secondary market trading due to a predominance of buy-and-hold investors.
Addressing concerns about the regulatory environment, Buch emphasized that SEBI’s efforts are geared toward easing business processes and reducing compliance burdens.
In the past year, only 21% of SEBI’s circulars focused on investor protection and risk reduction, which can increase compliance costs.
The majority—42 percent—focused on easing business processes, and 21% on making compliance easier.
“Contrary to the perception that regulation increases costs, a large portion of our efforts is aimed at development and ease of doing business,” she stated.
Frequently Asked Questions
What are REITs, InvITs, and muni-bonds?
REITs (Real Estate Investment Trusts), InvITs (Infrastructure Investment Trusts), and muni-bonds (Municipal Bonds) are financial instruments that allow investors to invest in real estate, infrastructure projects, and local government projects, respectively. They offer a way to pool funds and share the returns.
How much has the capital market raised in the first three quarters of the fiscal year?
The overall fundraising from the capital markets, including equity and debt issuances, has crossed Rs 3.31 trillion in the first three quarters of the fiscal year.
What is the projected growth for the capital market by the end of March?
The capital market is projected to grow by 21 percent, reaching Rs 14.27 trillion by the end of March, compared to Rs 11.8 trillion in the previous fiscal year.
How much has REITs, InvITs, and muni-bonds contributed to the overall capital raising?
REITs, InvITs, and muni-bonds have contributed around Rs 10,000 crore to the overall capital raising in the first three quarters of FY25.
What steps is SEBI taking to expedite the fundraising process?
SEBI is working to reduce the time taken for clearing fundraising proposals and has already reduced the issue aging for IPOs to a world record of three months. They are also focusing on easing business processes and reducing compliance burdens.
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