The Indian Real estate market is growing rapidly thanks to a buoyant economy and supportive regulatory environment. Special Economic Zones is the latest initiative by the Government. As a result , the funding requirement for commercial real estate is increasing substantially.
Commercial Mortgage Backed Securities (CMBS), globally a popular form of financing, can provide an alternative tool for the real estate industry.
CMBS is a financial instrument secured by receivables from commercial real estate. A CMBS instrument is created by pooling together commercial mortgages and securitising the pool. The RBI has already issued guidelines governing the securitisation of performing assets of lenders.
CMBS helps in transforming relatively illiquid assets into liquid and tradable instruments. It acts as an additional source of funding for the Developer as well as the Bank. It can provide an alternative instrument in the hands of the investor too.
Let's see whether CMBS can contribute to the growth of the commercial real estate industry in India.