Wednesday, 23 July 2014

Government provides incentives for real estate investment trusts(REIT) in Budget 2014

Finance Minister Arun Jaitley announced in the Union Budget on Thursday, that the government would provide necessary incentives to REIT's.  Also, to avoid double taxation, the REIT's would be given a tax pass-through status.
A real estate investment trust (REIT) is a company that owns, and in most cases, operates income-producing real estate. The REIT structure was designed to provide a real estate investment structure similar to the structure mutual funds provide for investment in stocks. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers, hotels and even timberlands. Some REITs also engage in financing real estate. REITs can be publicly or privately held. REITs can be classified as equity, mortgage, or a hybrid.

In reacting to the budget, Vinay Khattar (Edelweiss Financial Services | Head-Research) says, 'Overall the budget is very positive. The structure of the government focus points has been made clear. REIT was very positive for real estate. Infrastructure focus of the government has also become very clear especially for the roads space.'
After the announcement, real estate giants like HDIL and DLF saw a rise of over 9% in their stock prices.
Pre-budget Expectation:
Regulations on REIT:  Once introduced, the Indian Real Estate Invetment Trusts (REIT) will help individual investors enjoy the benefits of owning an interest in the securitised real estate market. The greatest benefit will be that of fast and easy liquidation of investments in the real estate market unlike the traditional way of disposing of real estate. The government and Securities and Exchange Board of India through various notifications is in the process of making it easier to invest in real estate in India directly and indirectly through foreign direct investment, through listed real estate companies and mutual funds.

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