Budget 2016 has cleared DDT problems in making REITs realty in India

Q: REITs is going to become a realty in India soon as government removed DDT on them.

Manisbapu, Mumbai

29th March 2016

Real estate News in Mumbai

real estate

real estate investment trust

reits

dividend distribution tax

ddt

retail investors

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Replies (3)

Yes, for your knowledge i would like to tell you that currently, DDT is applicable at 15% on special purpose vehicles owning the assets and is seen as a huge interruption to the introduction of REIT investments, essentially making them less attractive.

Pranab Malakar,

29th March 2016

Comment

Yes, and at the same time, Exemption from stamp duties has helped support the expansion of REITs in other financial markets, including Singapore. The removal of DDT is likely to please institutional investors who view India as an untried market for this asset class that has removes a major roadblock, making these investments attractive for investors.

Kunal,

29th March 2016

Comment

But don't forget that there are certain issues that need to be addressed to see any crowd any rush for REIT listing. However, this decision needs to be viewed from a long-term perspective and after estimating all other aspects of the REITs structure.

Sashidharan,

29th March 2016

@Sashidharan,
It is absolutely right. But there are two other critical issues that has to be exempted from capital gain tax ans state government's stamp duty while transferring assets to REIT's holding company would be key to REITs' success.

Kunal,

29th March 2016

In this matter, our finance minister told that to make easier investments in REITs and any distribution made out of income of SPV to the REITs and infrastructure investment trusts having defined shareholding will not be subjected to DDT.

Sashidharan,

29th March 2016

And you know, removing of DDT is expected to offer commercial developers a liquidity option and retail investors an opportunity to participate in the commercial realty market's growth. The final difficulties is in the way of successful listing of REITs in India has now been cleared.

Sashidharan,

29th March 2016

Comment

@Sashidharan,
As per JLL India chairman Anuj Puri, around 229 million sq-ft of office space can be seen as REIT-Complaint and it is assuming even 50% of these get listed. But their targets for the year is $18.5 billion worth. And we all know that the introduction of REITs has been under discussion for many years and none has yet been formed given the lack of clarity on taxation.

Rubiya,

29th March 2016