REIT mar­ket will re­quire strong sup­port from land­lords

HT Estates - - HTESTATES - - An­shu­man Mag­a­zine

The real es­tate sec­tor’s ex­pec­ta­tions of ex­emp­tion for Real Es­tate In­vest­ment Trusts (REITs) from tax­a­tion on dis­tri­bu­tion of div­i­dends were ad­dressed by the finance min­is­ter in his Bud­get state­ment ear­lier this week. This ex­emp­tion of Div­i­dend Dis­tri­bu­tion Tax ( DDT) for im­ple­ment­ing in­vestor-friendly REITs has been the most en­cour­ag­ing an­nounce­ment for the sec­tor in the coun­try in re­cent times. Any dis­tri­bu­tion made out of the in­come of a Spe­cial Pur­pose Ve­hi­cle (SPV) to the REIT will now not be sub­jected to any Div­i­dend Dis­tri­bu­tion Tax. While the fine print on the an­nounce­ment needs to be re­viewed, it is hoped that hav­ing cleared this hur­dle, com­pa­nies will now come for­ward to set up REITs in In­dia, which is ex­pected to be a game changer for the in­dus­try. The pre­vi­ous Union Bud­get had also at­tempted to clear tax­a­tion im­ped­i­ments for In­dia REITs, but had fallen short of in­dus­try ex­pec­ta­tions. Con­se­quently, the in­dus­try had not seen the es­tab­lish­ment of any REITs in In­dia since the Se­cu­ri­ties and Ex­change Board of In­dia (SEBI) an­nounced the fi­nal no­ti­fi­ca­tion on them in Oc­to­ber 2014.

I n t he pre­vi­ous bud­get an­nounce­ments of Fe­bru­ary 2015, the Gov­ern­ment had ra­tio­nalised the cap­i­tal gains tax for spon­sors of REITs and ac­corded pass-through sta­tus to rental in­come. Later dur­ing the year, it had al­lowed REITs to be treated as el­i­gi­ble fi­nan­cial in­stru­ments under the For­eign Ex­change Man­age­ment Act (FEMA); and had also clar­i­fied on cap­i­tal gains and Min­i­mum Al­ter­nate Tax ( MAT), but clar­ity was awaited on DDT.

The lat­est pro­posal, how­ever, is likely to lead to the es­tab­lish­ment of the first REIT struc­ture in In­dia. Es­sen­tially, the pricing and qual­ity of as­sets will be cru­cial for the suc­cess­ful launch of the In­dia REIT mar­ket. They also need to be made at­trac­tive for in­vestors, par­tic­u­larly for for- fully- fur nished home is Dh 430,000 (ap­prox ₹ 80 lakh) for a stu­dio flat, this was a sen­si­ble in­vest­ment.

Says the ac­tor, “De­vel­op­ers need to read the mar­ket re­quire­ments and re­spond to the con­sumers’ needs. Luck­ily, I found the prop­erty of my choice.” eign in­vestor groups. A suc­cess­ful In­dia REIT mar­ket will re­quire strong sup­port from ex­ist­ing land­lords and in­vestors, as well as favourable mar­ket con­di­tions. All in all, the suc­cess­ful im­ple­men­ta­tion and de­vel­op­ment of the REIT mar­ket in In­dia will rest on a num­ber of fac­tors re­lated to the reg­u­la­tory en­vi­ron­ment, mar­ket con­di­tions and is­suers/in­vestors. The au­thor is CMD CBRE South Asia Pvt Ltd


It is no secret that one can live in a su­per lux­ury home in Dubai at a frac­tion of the cost of top In­dian met­ros.

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