Real Estate Investment Trusts (REITs) could attract $1 billion worth funds this calendar year following tax benefits announced in the Union Budget, according to property consultant JLL India.

What did the budget propose?

Finance minister Arun Jaitley in his budget announcement rationalised capital gain tax regime for the sponsors of newly-created business structure REITs. He also proposed that the rental income arising from real estate assets directly held by the REIT would be allowed to pass through, and to be taxed in the hands of the unit holders of the REIT.

What is a REIT?

In September 2014, market regulator Sebi notified norms for listing of REITs that would help attract more funds in a transparent manner into the real estate sector. REITs, which can be listed on stock exchanges. REITs, a new investment avenue in India on the lines of one in developed markets like the US, UK, Japan, Hong Kong and Singapore, can be listed and trading would be allowed in units of REITs like any other security on stock exchanges

Who are planning to set up such trusts?

India’s largest realty firm DLF has recently announced plans to launch two REITs in the next fiscal to monetize its office assets. Others developers like Parsvnath and Bangalore-based Embassy Office Parks are also looking at this option. 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.

How crucial are REITs?

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 which need to be released to facilitate new infrastructure projects to take off.

What’s the benefit?

REITs would help channelize both domestic and overseas investments into real estate projects in the country. The tax incentives would give much-needed relief to the real estate sector, which is facing a huge slowdown in demand from last few years that had led to liquidity crunch and delay in completion of existing projects.

What’s the reaction?

“It’s a great decision. REITs will become a reality now,” said JLL India chairman and country head Anuj Puri. “We expect one or two REITs to be launched and get listed this calendar year worth about one billion dollar,” he said. He said foreign and domestic institutions would invest in REITs initially, before retail investors get excited for this newly created product. 

— PTI

Source :- DNA