Advertisement

HindustanTimes Tue,16 Sep 2014

REITs may fetch $10 bn in year one, say experts

PTI  Mumbai, July 13, 2014
First Published: 22:25 IST(13/7/2014) | Last Updated: 22:26 IST(13/7/2014)

Real Estate Investment Trusts (REITs), which now seems to be a reality, is likely to net a whopping $10 billion (around Rs. 6 lakh crore) this fiscal itself, providing much-needed funds to the cash-starved developers, industry experts said.

Advertisement

Finance minister Arun Jaitley had announced in the budget that REITs will get pass-through entity status and other incentives, including exemption from long-term capital gains tax.

“REITs will be the new funding mechanism for rental assets. This should bring in about $10 billion by March, of course subject to all the regulation by Sebi and stamp duty concessions by the state governments to be put in place,” said Niranjan Hiranandani, managing director, Hiranandani Group.

A REIT is a company that owns, and in most cases, operates income-producing real estate properties by pooling in money from investors. A pass-through entity does not have to pay corporate tax as the income from the entity is treated as personal income of the shareholders and taxed likewise.

“The clarification that tax on the income earned by REITs will be a pass-through, removes a major impediment to its attractiveness. This will allow channelising of funds from retail investors to the sector and provide diversification benefit to real estate investors,” an analyst at India Ratings said.

Experts believe that REITs will reduce the pressure on the banking system, avail fresh equity and attract long term finance — such as pensions funds — from foreign as well as domestic sources. “REITs will enable developers to access to cheaper funds compared to debt” said Gaurav Karnik, partner-tax, Ernst & Young India.


Advertisement
more from Business

Govt to decide on diesel deregulation after state polls

The local prices of the fuel are currently higher than the global rates, making a case for a cut in retail prices.This is for the first time this has happened,  due to a sustained monthly rise in local prices since January 2013.
markets
Advertisement
Most Popular
Advertisement
Advertisement
Copyright © 2014 HT Media Limited. All Rights Reserved