The finance minister in the Union Budget announced tax breaks for REITs on expected lines, enabling tax pass through and avoiding capital gains tax and stamp duties on transfer of assets by owners to a newly formed REIT, paving the way for REIT legislation in India.

''We expects cap rates to compress by 150-200bps from current levels of 10-11% to 8-9%, increasing the value for rental assets. We estimate that a 1% compression in cap rates can push up capital value of rental assets by 10%. REITs will also provide additional funding source for the developers and improve liquidity for the sector,'' said Edelweiss Securities.

''Further, introduction of REITs addresses liquidity concerns of real estate assets by lowering ticket size, mandated disclosures and by listing on stock exchanges.

Key developers owning rental assets include DLF (Buy), Unitech (Not Rated), Phoenix Mills (Not Rated), Indiabulls Real Estate (Not Rated), Prestige Estates (Not Rated), Brigade Enterprises (Buy), Oberoi Realty (Buy), Raheja Group (unlisted), Embassy Developers (unlisted) and RMZ (unlisted). In the institutional segment, Blackstone and Brookfield are the key funds with strong rental assets in India,'' the broking firm added.

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