Sebi approves proposal to introduce REITs
On August 10, Securities and Exchange Board of India (Sebi) – India’s capital market regulator – gave a long-pending go-ahead to a proposal underscoring the launch of Real Estate Investment Trusts (REITs).
The approval to REITs by the Sebi board unfolds an opportunity for cash-strapped developers to gain easy access to funds for completing their projects. In addition, a new investment avenue will be created for institutions and high net-worth individuals, and ultimately ordinary investors.
The Sebi board’s approval to introduce REITs implies that a separate set of regulations will finally be framed to govern the REITs, six years after the introduction of the trusts was proposed by Sebi.
The years-long delay in the launch of REITs was apparently a result of a perception that the taxation structure was unfavourable for investors. In the Union Budget 2014-15 announced by Finance Minister Arun Jaitley last month, the government planned to introduce friendlier tax norms for REITs as well as Infrastructure Investment Trusts (InvITs).
With regard to the new norms, Sebi said that all REIT schemes will be close-ended real estate investment schemes which will make investments invest in property with the objective of providing monetary returns to unit holders – in the form of rental income or capital gains from real estate.
Sebi said REITs will be allowed to invest in commercial real estate assets, either directly or via special purpose vehicles (SPVs).
Source – Live Mint
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