This would enable small investors to participate and bring in more transparencyAs per the 2011 Census,around 377 million,that is almost one-third of the population live in urban areas. A recent report by global property consultant Knight Frank says that by 2031 that figure would be nearer to 600 million. The report says that in 2012,urban areas had a shortage of 19 million homes,and almost 95 million people were living in slums.One solution to address the drastic shortage of housing is the concept of Real Estate Investment Trust or REITs. A REIT,is a company that raises money through an initial public offering (IPO) or pre-IPO investment like other listed companies. It then sells its shares to those who have funded it and uses the money to buy property.The REIT directly owns income-producing real estate assets and provides a trading mechanism to its investors. This means that REITs will enable individual investors to earn a share of the income produced through commercial real estate ownership. What this means is that individual investors will not have to invest huge sums and actually buy the property. They can get the benefit of the property market by investing small amounts to buy shares of a REIT just as if they would buy units of a mutual fund.REITs are very popular in the United States. Here,the REIT invests its corpus into real estate projects and shares 90 per cent of its profit after taxes with its shareholders. When it does this,it no longer has to pay any corporate income tax and the tax will be paid by the shareholders. This is done to ensure that no double taxation occurs and it ensures that the entire transaction is done in a very transparent manner.This income can be earned in two ways. Either the REIT puts its properties on rent to get a regular income,or it sells the property at a profit. This type of mechanism can very easily be done in India as the real estate market is still in its infancy and there is a huge demand for housing and commercial projects.REITs also manage the properties in order to ensure quality and deliver superior returns to its shareholders.While the real estate industry in India is a vital one it still suffers from great difficulty in raising funds from banks. Even real estate IPOs at the moment are struggling. So REITs also provides a very healthy mechanism for funding of real estate projects.Since the unnecessary delay of actually implementing REITs in India,some real estate developers have listed their own REITs in Singapore and used the funds raised there to finance projects in India through the FDI route.It is quite unfortunate that the real estate industry has to resort to using foreign money to bring to India as we still do not have a domestic policy or mechanism for REITs in India.Immediate introduction of a REIT policy will enable more active participation of small investors in the real estate market and will be an effective way to bring more transparency into the real estate sector.India has been slow to recognise the benefits of REITs. Back in 2008,the market regulator Sebi had issued draft REIT regulations. The then Sebi chairman CB Bhave had favoured the idea,but added that the main hindrance was the lack of transparency in the real estate market,variable stamp duties across different states and the lack of uniformity in land and property pricing.However,since 2008,nothing has happened. The final norms are yet to be notified. However,there seems to be some light at the end of the tunnel as the government in its recent communications had indicated that it is serious about implementing REITs very soon.One of the better benefits of REIT is that they will provide the much-needed hedge against inflation to the property market and enable investors to get a stable rental income,stability,increased liquidity and appreciation in capital gains over a period. In addition,the real estate sector gains the confidence of the customer,due to increased transparency.The market is more organised,there are more options and the customer is willing to invest,as he is more confident. The framework and details of REITs,once formulated,are likely to drive the investor demand across prime markets in the country.The author is MD,Chintels India