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The Reserve Bank of India (RBI) will let banks buy shares in real estate and infrastructure investment trusts (Reits and InvITs), removing one of the last hurdles for an asset class that has struggled to get off the ground for years. But some market participants still have doubts, warning that the debut deal will not come swiftly. John Loh reports.
The central bank announced last Thursday that the country's lenders can invest in Reits and InvITs, a decision it said was prompted by a request from the Securities and Exchange Board of India (Sebi).
Banks are already allowed to invest in equity-linked mutual funds, venture capital funds and equities for up to 20% of their net owned funds. The rule change adds Reits and InvITs to the list, and RBI is preparing to issue detailed guidelines at the end of May.
The news tantalised investors in India, with the Nifty Realty Index gaining 0.9% the day after the announcement. Shares in Indian property giant DLF have popped as much as 9% since the end of last week.
Issuers and investors alike have reason to be positive. Siddharth Shah, a partner at Mumbai-based law firm Khaitan & Co, said this was a crucial development as the lack of institutional interest had been one of the main concerns keeping the product from taking off.
"The regulatory framework is now...