Need clarity on taxation of REITs, says industry body

MUMBAI: Even as the new government's first Budget promises to boost the real estate sector, an industry association today said the Centre needs to bring more clarity on tax structure for REITs, companies that aim at improving capital investment in the country.

Asia Pacific Real Estate Association (APREA) called for a level-playing field between Real Estate Investment Trusts (REITs) and other business entities as far as taxation is concerned.

"The proposed approach to taxation rules require a urgent consideration if the Government's announcement is to translate into a successful India REIT model," APREA Chief Executive Peter Verwer said at an event here.

He said Infrastructure Investment Trusts (InvITs) and REITs will provide retail and institutional investors with a regulated platform to invest in income-generating real assets, boost foreign capital inflows in India and attract investment.

In his July 10 Budget, Finance Minister Arun Jaitley unveiled plans to provide incentives for establishment of REITs. He exuded confidence that InvITs and REITs would attract long-term finance from foreign and domestic sources.

"Though this is a positive first step that can help spur economic growth by attracting much-needed capital for India's nation-building programmes, the proposed tax structure for REITs could result in multiple levels of tax for domestic investors."

Verwer said "Of course, there are several key details to be finalised and APREA looks forward to continuing its constructive dialogue with the authorities to ensure that the final REIT model meets its goal of economic growth."

The proposed treatment of Dividend Distribution Tax (DDT) at SPV level and Capital Gains Tax (CGT) on sale of units of REITs by sponsors would seriously dent the appetite for REITs, he said.

"We propose the Government establish a level-playing field between REITs and other entities as far as taxation is concerned. By aligning DDT and CGT relief between REITs and other business entities, the government will effectively foster a new investment asset class."

APREA is a non-profit industry body that represents and promotes the real estate asset class in the Asia Pacific region.