As the infrastructure and real estate sector are in need of funding, the real estate investment trusts (REITs) and Infrastructure investment trusts (InvITs) can help raise about 50,000 crore, suggested by a study titled ‘Building a new India’ from Assocham jointly with global research firm Crisil.
According to the study, public sector banks require equity of Rs 1.7 lakh crore by March 2019 in which they have contributed nearly of half of the debt funding in infrastructure space. The banks are not able to generate profits through its internal accrual and raise capital from external sources.
Infrastructure sector requires to pitch in and complete the financial needs of the banks through the capital bond market.
The raised amount through REITs and InvITs can be used to repay the debt from banks or Non-Banking Financial Companies (NBFCs)/Financial Institutions (FIs) or to sponsor for dilution of stake. This fund helps monetise sponsors’ investment for long gestation project or the banks fund in other infrastructure projects.
As per the study, the ideal mode of financing infrastructure projects is for banks to focus on funding up to the pre-commissioning stage of projects. Once the project is commissioned and stable, the banks use bonds to long-term investors refinancing the debt. This will give them liberty to enable their redeployment in new projects with some savings. The credit enhancement would be the key to making corporate bonds attractive to investors.
Source: ET Realty