BSE panel getting ready to issue final listing norms

With tax clarity on real estate investment trusts (Reits) and infrastructure investment trusts (INViTs) made in the budget, the stock exchanges are now getting ready to allow listing of these units.

The BSE working group will review the changes announced in the budget before issuing the final listing norms. “The BSE working group on Reits will meet to review the norms in the light of the recent budget announcements,” said BSE CEO & MD Ashish Kumar Chauhan.

BSE is ready to allow listing of Reits and is expect that a few developers and issuers will be listing the units in the next 12 months, he added.

“We expect that there will be some large issuance during the year and are expecting good retails and institutional participation in the products and this will provide investors to take exposure in the real estate sector in a systemic manner and avoid lot of hassles,” he added.

These units will be listed like mutual fund products on the exchange platform and investors will be able buy them over-the-counter and units are unlikely to be traded on real-time basis, he added.

The finance minister in the budget has clarified that there will not be any capital gain tax on transfer of assets from developer to the trust and the pass through status has been provided to trust.

However, there are a few clarification regarding pass through is need but many real estate players are firming up plans to hit the market.

“We are expecting at least 10-12 issuance will be there in the next two to three years and the fund moblisation could be in the range of $2 billion to $3 billion, according to an official of a top merchant bank who is actively advising a few developers.

Several large developers have announced that they would be looking at coming out with Reits. These include India’s largest realty firm DLF which plans to launch Reits to monetise its office assets. Developers like Parsvnath and Bangalore-based Embassy Office Parks are also looking at this option.

In September 2014, market regulator Sebi had notified norms for listing of Reits that would help attract more funds in a transparent manner into the real estate sector. Following which the BSE has come out with a its listing rules.

It is expected that Reits, which will be listed on stock exchanges, would help channelise both domestic and overseas investments into real estate projects in the country.

Although partial pass through was given in the last year’s budget presented in July, real estate developers and property consultants have been demanding further tax clarity in Reits to ensure the launch of this trust for commercial assets.

“A step was taken in the last budget to encourage real estate investment trusts and infrastructure investments trusts by providing partial pass through to them,” finance minister said in his budget speech.

Stating that these collective investment vehicles have an important role to revive construction activity, the finance minister had said that a large quantum of funds is locked up in various completed projects that need to be released to facilitate new infrastructure projects to take off.

The finance minister proposes to rationalise the capital gains regime for the sponsors exiting at the time of listing of the units of Reits and INViTs, subject to payment of securities transaction tax (STT). The rental income of Reits from their own assets will have pass through facility.

Reits are a popular instrument in developed markets like the US, UK, Japan, Hong Kong and Singapore and could be listed and trading like any other security on stock exchanges.

It is expected with the tax incentives provided many developers could come out with Reits and enchase their investment which would give much needed relief to the real estate sector. The real estate sector is reeling under heavy debt and tepid in demand over the last few years leading to tight liquidity situation and delay in projects execution.


- by Ashwin J Punnen

Source :- Financial Chronicle