TEXT-Moody's and ICRA Ltd on real estate securitization in India

(The following statement was released by the ratings agency)

May 8 - Moody's Investors Service and ICRA Ltd (ICRA.BO: Quote, Profile, Research) consider the environment for the development of a CMBS market in India as challenging, but at the same time say progress has been made.

"Based on our analysis of key success factors for CMBS, India's regulatory environment is still challenging," says Kalpesh Gada, head of structured finance products at ICRA, adding, "Title due diligence can be lengthy, and mortgage enforcement is still an issue for non-banker lenders."

"At the same time, stamp duties are another major obstacle, and in terms of the environment, a broader investor base and more transparency are also needed for issuance to take off," says Gada. Gada was commenting on the release of a report he authored with Moody's on the prospects for the CMBS market in India, and which covers a variety of issues, such as regulation, ownership, taxation, bankruptcy and investor bases.

Despite the constraints to the growth in CMBS in India, some positive trends have emerged in recent years, particularly the creation of real estate SPVs, which would remove many issues related to property transfers, the report says. In addition, the central government is encouraging a reduction in stamp duties. And the investor base could be broadened by the creation of REITs and Real Estate Mutual Funds, the report says. Finally, the new Basel II regulations place CMBS on a favourable footing vis-à-vis plain loans.

The report - Real Estate Securitization in India and Factors Favoring CMBS - can be found at www.moodys.com and www.icraratings.com

ICRA Limited is an associate of Moody's Investors Service. ICRA provides credit ratings and analysis for a wide range of rupee-denominated securities.