Finance Minister Arun Jaitley's proposed removal of dividend distribution tax has received a thumbs-up from the real estate sector which has been looking for a clarity to launch Real Estate Investment Trusts (REITs) for raising funds.
"DDT is considered to be one of the biggest hurdles left in making REITs financially viable. The government has already taken various steps to ease path for REITs. With most of the hurdles getting removed, we may see introduction of REITs here soon," Colliers International India Senior Associate Director, Research, Surabhi Arora said.
The introduction of REITs in India would spell scores of opportunities for developers, private funds, financial institutions, among others, as they can be used as an exit, Knight Frank India Chairman and Managing Director Shishir Baijal said, adding that doing away with the DDT has removed the roadblock in launching REIT scheme.
"REIT has finally got its due with the abolishment of the DDT that was holding back asset owners. This is a welcome move for the industry. There will be no roadblock in launching REIT schemes any time now," he said.
With removal of DDT on REITs special purpose vehicle, the REITs structure of India is now at par with global regulations, KPMG India Head of Real Estate and Construction, Neeraj Bansal said.
"REITs take-off is expected to improve liquidity situation in the real estate sector as it would ease exit for developers from completed properties," he said.
Appreciating the initiatives taken by the Finance Minister, PwC India Partner-Tax, Abhishek Goenka said, "exemption from dividend distribution tax in the REIT structure demonstrates the intent of the government to promote listing of REITs. With this exemption being introduced, REIT listing should not be too far from becoming a reality."
Choice International Managing Director Kamal Poddar said there could be a shift from mutual funds to REITs after the exemption of DDT.
"The decision to scrap dividend distribution tax on REITs may make it easier for home developers to raise funds by making investments in it more attractive. It would pave way for more REIT funds being launched, which was so far being subdued. Retail investors may see some shift from mutual funds to REIT, to some extent," he said.
Jones Lang LaSalle India Chairman and Country Head Anuj Puri said there is nearly 230 million sqft of office space in India and it is about USD 18 billion that can come in REITs.
"Because this sector is going into some liquidity crisis at this point in time, so if there is foreign money that can come into REITs, it will now become reality because dividend distribution tax is not applicable on it. Earlier, REITs was getting doubly-taxed. Now that DDT is going to go away, we believe that it is going to be a big boost," he said.
Valion CEO and Founder Amit Lalit said, "DDT was a stumbling block for REITs which would now resolve most of the issues pertaining to MAT and capital gains. Further, it would help developers to raise funds with an ease, as this makes investments attractive for investors as well."
Centrum Capital Head - Real Estate Group Ajay Jain said doing away with the DDT could single-handedly revive the real estate sector as well as provide a significant boost to the economy.
"This will remove the bottlenecks and could result in more REIT listings by developers in times to come, eventually posing an opportunity to small investors at considering an alternative class of investments," he said.
"The Finance Minister has taken a cautious, yet courageous path with his budget announcements. It will reap long-term benefits for the economy on a whole. The FM in order to promote REITs in the country has provided an exemption to Dividend Distribution to SPV’s where the REITs have specified shareholding," Kamal Khetan, CMD, Sunteck Realty Ltd.
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