Capital gain and pass-through status to Real Estate Investment Trusts (REITs), curbing of black money in the real-estate sector and housing for all, are some highlights for the real estate sector. However, the industry wants to see more on easing the liquidity crunch. Real estate watchers said the pass-through status will help monetise real estate assets and attract new investments in REITs. It will also establish a level-playing field for the domestic and foreign private equity funds.
A ‘pass-through’ status means that the income generated would be taxed in the hands of the investor, and that the fund itself would not have to pay tax on the same. Without this clarification, it was feared that REITs may be subjected to double-taxation; paying tax whenever income was generated at the fund level, and then again in the hands of the investor.
Real estate players such as DLF had already announced plans to launch REITS in the next fiscal.
Rajeev Talwar, Group ED, DLF Ltd, said: “This is a directional Budget. For the real estate sector, the government had already introduced norms for REITs last year, but could not make much progress, with clarity pending on taxation related matters. Through the Budget, the Finance Minister has addressed this issue.”
Ahead of the Budget, SEBI had sought easing of taxation norms for REITs from the Government. It had recommended the abolition of capital gains tax and minimum alternate tax for REIT sponsors and investors.
Anshuman Magazine, CMD, CBRE South Asia, said: “Rental income under the REIT structures has also been given a pass-through status, while a mere presence of a fund manager in India does not indicate permanent residence and not to face adversarial tax consequences.”
The Centre has also allocated ₹22,407 crore in the next fiscal for implementing its vision to provide housing for all by 2022.
Anuj Puri, Chairman & Country Head, JLL India, said: “The Budget is low on big bang reforms and real estate is only an indirect beneficiary.”
(This article was published on February 28, 2015)
