Real estate trusts- a new mode of tax free instrument is expected to be the new investment mantra
There seems to be some good news for the real estate sector in the upcoming budget. Real estate investment trusts (Reits), are expected to get an approval in the upcoming Budget. This will open up a new source of funding for developers battling declining sales and high cost of funds.
Maadhav Poddar, the associate director, real estate practice, Ernst & Young (E & Y) stated that Reits, are similar to mutual funds and they can be listed and traded on exchanges. They are expecting to attract investments of $10-15 billion (Rs 60,000-90,000 crore) in the first year of operations.
Reits are tax-free instruments that invest in income-generating assets such as offices and malls and distribute the income as dividend to unit holders. Since the infrastructure and realty sectors are expected to boom in the Modi regime, the market speculates a positive trend for Reits.
They are expected to benefit companies like DLF, Prestige, Phoenix Mills**** and privately held firms such as Embassy and K Raheja Corp that have a large portfolio of leased assets.
Poddar also mentioned that companies like Infosys, Wipro and TCS could look at selling their office assets to Reits and taking them back on lease. A unique way to increase passive income.
Source- Business Standard
