Realty, REITs get impetus in budget

Last Updated: Mon, Feb 29, 2016 17:53 hrs
Real estate

Finance Minister Arun Jaitley on Monday gave a shot in the arm to real estate sector in the 2016-17 general budget by waiving Dividend Distribution Tax (DDT) on Real Estate Investment Trusts (REITs).

"I propose that any distribution made out of income of Special Purpose Vehicles to REITs and Infrastructure Investment Trusts (InvITs) having specified shareholding will not be subjected to DDT," said Jaitley.

He said the move is aimed at facilitating investments in REITs and stimulating housing activity.

Welcoming the DDT waiver, Hemal Mehta, a partner in Deloitte Haskins & Sells, said: "From the speech of the Finance Minister, one of the most awaited exemptions of DDT on the dividend declared by the portfolio company to REIT and InvIT has been proposed."

"With this amendment, all the required fiscal support for REIT and InvIT to make it a reality has been done. This will support the developer and fund managers to raise funds through REIT/InvIT and create liquidity," added Mehta.

REITs enables developers to raise funds by selling completed buildings to investors and listing them a trust, they are listed entities which invest in retail assets and leased office.

DDT is currently pegged at 15 percent and with its exemption REITs listing will gather momentum.

They are also expected to open many opportunities for developers, private funds, financial institutions and others.

"REITs hold a huge opportunity for developers and investors in India, given the potential in the Indian real estate market. However, abolishment of DDT alone may not be sufficient enough for companies to launch REITs in the coming months," said Sanjay Dutt, managing director, Cushman and Wakefield India.

Dutt said DDT was applicable on SPVs until now, which was a huge hindrance in the introduction of REITs investments, making them less attractive.

The minister's other sops for the real estate industry included exemption of service tax on construction of affordable houses up to 60 square metres under central or state government schemes, including Public Private Participation.

He also extended the exemption of excise duty to ready mix concrete, currently available to concrete mix manufactured at construction sites.