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The Government intends to provide necessary incentives for Real Estate Investment Trusts (REITS) as it would be set up in accordance with the Securities and Exchange Board of India (SEBI) regulations.
“REITS have been successfully used as instruments for pooling of investment in several countries. I intend to provide necessary incentives for REITS, which will have to pass through for the purpose of taxation,” Finance Minister, Arun Jaitley, said in his Budget speech on Thursday.
“As an innovation, a modified REITS type structure for infrastructure projects is also being announced as Infrastructure Investment Trusts (InvITs), which would have a similar tax-efficient pass-through status, for PPP and other infrastructure projects. These structures would reduce the pressure on the banking system, while also making available fresh equity. I am confident these two instruments would attract long-term finance from foreign and domestic sources, including the NRIs,” Jaitley added.
“The budget has some positive news for the real estate sector. The FM has clarified that REITS would be given a tax pass-through status to avoid double taxation. This will help developers create liquidity and raise capital using REIT,” said Sharad Mittal, Director & Head–Real Estate Fund, Motilal Oswal Real Estate.
“A lot of private equity funds are looking at exiting their investments via REIT. This brings the much needed relief to the overall cash strapped real estate sector. Change in FDI rules with minimum built up being reduced to 20,000 sq m v/s the earlier 50,000 sq m is a big positive for the sector,” Mittal added.
“The government has clearly shown its focus on infrastructure and real estate sector by making a proposal to provide a tax pass-through to Infrastructure Investment Trusts and REITS. This was one of the biggest uncertainties and bottlenecks which prospective real estate and infrastructure trusts were facing for the set-up and the tax clarity will see the creation of many such REITS,” said Bijal Ajinkya, Partner at Khaitan & Co.
“The REITS platform provides an attractive option to exit some investments and will give developers a new avenue to raise funds and conduct development activities in the country,” he added.
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