The Asia Pacific Real Estate Association (APREA) members welcomed the much needed relief to infrastructure investment trusts (InvITs) and real estate investment trusts (REITs) by way of exemption from taxation of dividends in the Finance Act 2020.
Ms. Sigrid Zialcita, APREA CEO said, “We are enthused by the Indian Government’s swift decision to make amendments to the February budget announcement on DDT implication on REITs and InvITs. With the announcement early this week on the Finance Act 2020 exempting dividend distribution in the hands of the unitholders of Business Trusts, it has brought much needed cheer. It has encouraged and incentivized REITs and InvITs by avoiding multiple levels of taxation. We applaud and thank the Indian government for this positive move.”
“The decision to continue with a single level levy of income tax on InvITs and REITs is a welcome one, sending a positive message to investors on consistency in Indian tax laws, which in the current environment, was much needed,” said Mr. Gautam Mehra, Partner and Leader, Tax and Regulatory Services, PwC India.
This will further reduce the pressure on the banking system by making available fresh equity, will attract the foreign funds and make it much attractive to the investors.
Mr. Saurabh Agarwal, Managing Director, Infrastructure, South Asia, at CDPQ said “Through this process, the availability and engagement of APREA and government officials provided a good opportunity to explain investors’ points of view and the need for these amendments to remain in line with global best practices. The initiative will hopefully foster long-term infrastructure investments that will have a lasting impact on the Indian economy.”
Mr Gaurav Karnik, National Leader Real Estate, EY India noted that, “The reintroduction of the dividend tax exemption albeit subject to conditions coupled with the income tax exemption made by Sovereign Wealth Funds and Pension Funds for investments made by them in InvITs, are welcome steps which should revive the REIT/InvIT market and attract long term patient capital into the country.”
With COVID-19 looming large on all industries including the already suffering real estate industry these are difficult times. But with this announcement the government has encouraged the issuers and investors going back to their REITs and InvITs issuances.
Mr. Harsh Shah, CEO of IndiGrid, India's first power sector infrastructure investment trust said “We welcome Ministry of Finance’s amendment on February 2020 Budget proposal of taxing dividends in the hands of all investors including REIT and InvIT unitholders. Exempting dividends from taxation, in the hands of the unitholders, will restore the confidence of the investors in REITs and InvITs. REITs and InvITs are proven as credible platforms to own long term infrastructure assets and earn a stable yield. I am confident that it will play a crucial role towards India’s goal of becoming a USD 5 trillion economy by mobilizing large amount of capital for infrastructure assets.”
All the encouragement that the government provided to REITs and InvITs will also galvanize providing funds for public-private partnership (PPP) model which are going through challenging times.
Mr. Ruchir Sinha, Co-Head Private Equity and M&A, Nishith Desai Associates stated that, “Relaxation of Taxation on dividends for REITs and InvITs has indeed sent a very positive message to global investors. It reassures the stakeholders that the government is listening, is committed to ensure success of REITs / InvITs and any retrograde measures taken will be corrected promptly.”
We also applaud the continuous support of market regulator Securities and Exchange Board of India (SEBI) in providing a conducive regulatory environment to REITs/Invits which has helped REITs/InvITs operate seamless and has provided the necessary clarity to potential issuances. We also thank SEBI for providing temporary relaxation in compliance to REITs and InvITs in the light of COVID-19.
With this exemption of dividend from tax, temporary relaxation in compliance, and once the COVID-19 crisis settles, it will give the much needed boost to the markets and the investors. As an association APREA is committed to ensure a thriving market for REITs and InvITs in India.
APREA India Contact:
Ms. Neetu Singh
Country Principal (India)
APREA India Chapter
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About APREA
APREA is a non-profit trade association that represents property investment industry across Asia Pacific. Our members include prominent pension, insurance and sovereign wealth funds, investment managers, financial institutions, family office platforms, developers, professional firms, and thought leaders. APREA’s focus is cross-border investment and engages closely with governments to help open-up and expand property investment markets by working with governments to improve business ground rules. APREA hosts chapters in China, Japan, India, Australia, Malaysia, Singapore, Hong Kong and the Philippines.
APREA’s policy solutions address:
- REITs & securitisation frameworks;
- infrastructure and nation-building programs;
- housing affordability;
- sustainability & ESG;
- investor-focussed practices for fund managers; and,
- informed, skilled and transparent markets.
