20 Jun '16
Real Estate Investment Trusts ( REITs ) are likely to become a reality in India soon as the government moves to remove dividend distribution tax ( DDT ) on them.
This is expected to offer commercial developers a liquidity option and retail investors an opportunity to participate in the office realty market's growth. The final hurdle in the way of successful listing of REITs in India has now been cleared
Although the introduction of REITs has been under discussion for several years, none has yet been formed given the lack of clarity on taxation.
REITs own properties and their rental income is distributed among investors. Currently, DDT is applicable at 15% on special purpose vehicles owning the assets and is seen as a huge hindrance to the introduction of REIT investments , essentially making them less attractive
Two other critical issues — exemption from capital gains tax and state governments' stamp duty while transferring assets to REIT's holding company — would be key to REITs' success
The move is also expected to bring foreign funds into India's financial markets. Developers are hoping this will help them unlock the value of assets by listing incomeearning commercial portfolio
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