Real estate player DLF Ltd awaits Finance Minister Arun Jaitley’s Budget to give clarity on tax treatment for Real Estate Investment Trusts (REITs), through which the company expects to ease its ₹20,000-crore debt.

While the company has already appointed investment banks JP Morgan and Morgan Stanley for listing REITs, Rajeev Talwar, Group Executive Director, DLF, said issues need clarity before the industry goes ahead. For sponsors to structure REITs, they have to exchange shares (of underlying properties) in a special purpose vehicle. Currently, there is no clarity on whether transfer of shares will attract minimum alternate tax (MAT) or not.

“REITs in India need to be competitive in terms of MAT and Dividend Distribution Tax (DDT),” he told BusinessLine .

“Ninety per cent of the lease rentals are supposed to be distributed to the buyers of units, whether be an individual or an FII (foreign institutional investor).

There would be less incentive to invest if you cut down returns in the form of DDT.”

The developer is committed to forming two REIT platforms to monetise almost 30 million sq feet of commercial assets, DLF had said in its investor presentation post the third quarter financial results.

It will create two REIT platforms next year – one for office and the other for retail — and will target first filing within fiscal 2016.

The current attributable net debt to developmental business (DevCo) is ₹6,350 crore and to leasing business (RentCo) is ₹14,000 crore. The leasing business is 30 million sq ft.

The company has reported a 9.2 per cent drop in net profit at ₹131.79 crore for the third quarter of the current fiscal, compared with ₹145.29 crore in the same period a year ago.

The total income from operations fell 4.9 per cent at ₹1,956.72 crore (₹2,058.42 crore).

As far as the developmental business debt is concerned, it has taken a hit over the last six years.

But if the company strikes a large deal, then it can wipe out some of its debt, and reduce the developmental debt first.

If an REIT comes in, then the company will get an immediate boost, as it will be able to reduce its debt.

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