Governance Rating

Rating of REITs/ InvITs

  • REITs: A Real Estate Investment Trust (REIT) is a corporation or a trust which utilizes the pooled capital of multiple investors to purchase, and in most cases, operate income generating real estate such as offices, shopping complexes, hotels and warehouses. REITs are beneficial to both the investors and the real estate industry. REITs provide the sponsor (a developer or a private equity fund) long term capital, avenues of exit and enable them to invest in other projects. REITs have introduced additional transparency and liquidity in the Indian real estate market. The rating of debt at REIT level or at SPV level is an opinion on repayment capacity of REIT in a timely manner.

    CARE’s rating for REITs is based on the credit quality of the portfolio of assets which form part of the REIT taking into account management, operational risk and financial risk. Click here for Rating Methodology on REITs.

  • InvITs: Infrastructure Investment Trusts (InvITs) are similar to REITs; they utilize the pooled capital of investors to buy and manage income-generating infrastructure assets such as roads, transmission towers, wind, solar, ports, airports, telecom etc. InvITs are permitted to issue units (equivalent to equity) that are listed and traded on the bourses.

    The rating of consolidated debt of InvIT is an opinion on the capacity of InvIT to repay its debt in a timely manner.

    The most important driver of the InvIT’s credit rating is the credit quality of the assets it owns. CARE Ratings recognizes that the entire cash flow which is available to the InvIT to service its debt (that of both holdco and SPVs) is to be generated by its investments in infrastructure assets. Credit rating of borrowings of InvIT involves evaluation of broadly three key rating factors- credit quality of portfolio of assets, financial risk and management risk. Click here for Rating Methodology on InvITs.