Hindenburg Allegations ‘baseless and misleading’, Says Indian REITs Association

Aug 12, 2024: The Indian REITs Association (IRA), said on Monday that the recent claims made by the US-based short seller Hindenburg Research suggesting that the REIT policy changes made by the markets regulator SEBI to favour a financial major, are “baseless and misleading.”

A statement issued by IRA says that, “recent claims suggesting that the REIT framework serves the interests of a select few are baseless and misleading.” 

“Since the introduction of REIT regulations in 2014, India has established a strong and transparent regulatory framework that aligns with global best practices. Developed in consultation with all market participants, this framework ensures the highest levels of investor protection for both, domestic and international institutional investors, as well as retail investors”, mentions IRA statement.

What Are RETTS?

• REITS (Real Estate Investment Trusts) are entities that primarily own and operate a portfolio of commercial real estate properties, for returns, mostly rental income.
• The portfolio is divided into units, which are sold to buyers. 90% of the income generated is distributed to unitholders.
• In India, these entities are incorporated as trusts
• The market capitalisation of all listed REITS & InvITs (Infra investment trusts) have recently crossed the Rs 10 lakh crore mark.

Accusing Sebi chief Madhabi Puri Buch and her husband Dhaval Buch, Hindenburg report says, “During Dhaval Buch’s time as advisor to Blackstone, Sebi has proposed, approved and facilitated major REIT regulations changes. These include 7 consultation papers, 3 consolidated updates, 2 new regulatory frameworks and nomination rights for units, specifically benefiting private equity firms like Blackstone.” 

Hindenburg also mentions that during industry meets, Sebi Chairperson Buch termed REITs as her “favourite products for the future” and urged investors to look “positively” upon the asset class. “She omitted to mention that Blackstone, who her husband advises, stands to gain significantly from the asset class,” Hindenburg said.

The Buchs, in response, issued a clarification that over the last two years, SEBI has issued more than 300 circulars (including “Ease of Doing Business” initiatives in line with the developmental mandate of SEBI) across the entire market ecosystem. All regulations of SEBI are approved by its Board (and not by its Chairperson) after extensive public consultation. Insinuations that a handful of these matters related to the REIT industry were favours to any specific party are malicious and motivated.

The IRA statement further adds that, “IRA commends SEBI and its leadership for crafting a rigorous regulatory environment that includes comprehensive periodic reporting requirements, mandatory independent valuations, and strict governance standards. These measures are designed to enhance transparency and protect investor interests.” 

Brookfield India Real Estate Trust, Embassy Office Parks REIT, Mindspace Business Parks REIT, and Nexus Select Trust are the founding members of the Indian REITs Association.