The government on Monday said debt financing of emerging investment vehicles – REITs and InvITs – will be enabled by making a suitable amendment in order to attract more investment in the real estate as well as infrastructure sectors. REITs (real estate investment trusts) and InvITs (infrastructure investment trusts) are relatively new investment instruments in the Indian context but are extremely popular in global markets.
While a REIT comprises a portfolio of commercial real assets, a major portion of which are already leased out, InvIT comprises a portfolio of infrastructure assets such as highways, power transmission assets.
“Debt financing of InVITs and REITs by foreign portfolio investors (FPIs) will be enabled by making suitable amendments in the relevant legislations,” Finance Minister Nirmala Sitharaman said while presenting the Union Budget 2021-22 in Parliament.
This will further ease access of finance to InvITS and REITs thus augmenting funds for infrastructure and real estate sectors, she added.
In order to provide ease of compliance, the finance minister proposed to make a dividend payment to REIT and InvIT exempt from tax deducted at source (TDS).
Further, as the amount of dividend income cannot be estimated correctly by the shareholders for paying advance tax, the minister proposed to provide that advance tax liability on dividend income would arise only after the declaration/payment of dividend.
Also, for FPIs, it has been proposed to enable deduction of tax on dividend income at a lower treaty rate.
Securities and Exchange Board of India (Sebi) first issued the guidelines for REITs and InvITs in 2014, and revised them in 2016 and 2017.
Ever since Sebi introduced InvITs, markets witnessed the listing of two public InvITs — IRB InvIT Fund and India Grid Trust. Some InvITs – IndInfravit Trust, India Infrastructure Trust, Oriental InfraTrust and Tower Infrastructure – were privately placed.
Further, Power Grid Corp of India last week filed preliminary papers with capital markets watchdog to float infrastructure investment trust through which it seeks to raise over Rs 5,000 crore.
On the other hand, Embassy Office Parks REIT and Mindspace REIT are the only two listed real estate investment trust, while Brookfield India REIT would launch its initial public offer on February 3.
(The story has been published from a wire feed without modifications to the text. Only the heading has been changed)