Will optimism of Indian property developers continue?

The Indian developer DLF is still working on listing a $1.5 billion property trust in Singapore and expects the initial public offering to be made in the second quarter of 2008, despite bruising market conditions.

DLF, India's most valuable property firm, had hoped for an offering for its real estate investment trust, or REIT, in the first three months of this year, bankers have said, although volatile markets led some to predict a delay.

Investor nerves have derailed two planned IPOs in India in the past week: a $1.64 billion deal by the developer Emaar MGF and an offering by Wockhardt Hospitals. According to Thomson Financial, 21 offerings worth a total $6.3 billion were pulled in January worldwide.

Singapore's property trust market, whose share prices slid last year amid global credit problems, appears equally hostile. But DLF's chief financial officer, Ramesh Sanka, said his firm expected a go- ahead for the offering from market regulators within a month.

“The process of creating a REIT is going on, but we haven't got all the approvals in place,” Sanka said from New Delhi. “We should be getting approvals in a month, then we will have to take the next step.”

When asked if the initial public offering would be made in the second quarter of this year, he said: “I think so.”

Indian developers are eager to raise funds for expansion by selling buildings into property trusts, in which they would retain a controlling stake. The trusts, which pay most of their rent as dividends, should then become willing buyers of buildings as the developers roll out new projects.

The Indians have been watching the success of Singapore's REIT market, which has grown to almost $19 billion.

India does not yet allow such a security, although regulators issued draft guidelines in December. Analysts expect next month's budget to give some indication of when India will get its own REIT market.

Although REITs are usually regarded as defensive investments, trusts across the world suffered in the second half of 2007 as the U.S. subprime crisis unfolded and hit commercial property markets in the United States and Europe. Singapore's REIT index has fallen 16 percent already this year.

Will the prospects for the Singapore property market improve?