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Developers in no mood to embrace Reits despite budget sops

No clarity on MAT and DDT could be the biggest dampener for launching Reits

Raghavendra Kamath  |  Mumbai 

While the government may have moved a step closer to the launch of Real etstate investment trusts or by giving certain exemptions in the union budget, and tax experts believe that some glitches still exist for the launch of the instrument.

are like mutual funds which can be listed and traded on stock exchanges. They are tax efficient as they need to distribute majority of their income as dividends. In the Union for 2015-16, the finance minister exempted capital gains for the sponsors at the time of listing of units of and gave pass-through of rental income on assets held by to unit holders, which were long pending demand of investors and

But with no clarity on minimum alternate tax (MAT) and dividend distribution tax (DDT) could be the biggest dampeners for launching Reits, say and tax experts.
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"Internationally, there is no or We will have to see whether investors find domestic structures attractive or not. It depends on how investors look at tax implications here," said Rajeev Talwar, executive director at DLF, the counrty's largest developer which is expected to be benefited from launching

Sunil Hingorani, director (finance) at K Raheja Corp, one of the largest owners of commercial properties in the country, elaborates.

"This (exemptions) do not do anything. When you are transfering assets to Reit, holding attract on 100 per cent of notional gains," Hingorani says.

He adds that since distribute entire profits, there is a lot of tax leakage. Some like Punit Shah, co head of tax at KPMG believes liability is triggered twice in Indian scenario. Shah says the exemptions announced by the FM becomes irrelevant since liability is triggered twice once at the sponsor level when he transfers shares to Reit and secondly when they sell units of

"This could act as dampener in the process of launching Reits," he said, He said the FM has also not clarified on stamp duty which is a state subject.

However, Atul Ruia, managing director at Phoenix Mills say that barring issue, proposals are extremely positive for the launch of and they are seriously considering the launch of this year.

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