Exempt REITs from DDT, stamp duty: CBRE

Real Estate Investment Trusts should be exempted from the dividend distribution tax and stamp duties in the upcoming Union Budget so as to make them attractive to domestic and foreign investors, says property consultant CBRE.
"Despite several announcements relating to the taxation structure for domestic REITs in the previous Budget, they continued to fall short of industry expectations," CBRE South Asia CMD Anshuman Magazine said in a statement.
Government has introduced REITs to attract funds in a transparent manner into the realty sector. Last year, it gave relief to REITs on the minimum alternate tax (MAT), saying that it would be applicable on them only when there is actual transfer of their units.

Still, there has not been a single REIT listing till date. REITs, which can be listed on stock exchanges, are the new funding mechanism for rental assets.
CBRE said much still needs to be done to finalise tax structures of REITs in India and make them attractive to investors, particularly to foreign groups.
"What the industry now primarily hopes for in the upcoming Budget is exemption for REITs from taxation on stamp duty and distribution of dividends," Magazine said.

In its current form, CBRE said that imposition of DDT and stamp duties would lower the valuation of REITs, making the newly created structure unviable and unattractive for overseas as well as domestic investors.

"Essentially, the pricing and quality of assets will be crucial for the successful launch of the REIT market in India," CBRE said.
These recommended changes to the REIT taxation structure have the potential to become the biggest enabler for initiating REIT listings in India, CBRE said.
"It is important, therefore, that the performance of other regional REIT markets is reviewed before further announcements are made in the upcoming Budget," it added.