Tax Breaks for REITs and InvITs: A New Era for Investors?
The Indian government's recent budget proposals have brought cheer to investors in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), aligning their long-term capital gains (LTCG) holding period with that of listed equity
ReitsInvitsLtcgReal EstateInfrastructureInvestmentTaxationReal Estate NewsJul 28, 2024
Experts believe that this policy change will increase investments, making REITs a more attractive asset class compared to other long-term investments. According to Ramesh Nair, CEO of Mindspace REIT, this move will appeal to investors seeking quicker returns and attract short-term investors who may have previously been deterred. This is expected to lead to more diversified and robust investment portfolios, ultimately driving growth in the commercial real estate market.
The removal of the indexation benefit for long-term investments in immovable property is also expected to give a boost to REIT and InvIT units. Without the ability to adjust property prices for inflation, property sellers may find investors more inclined towards these asset classes rather than direct real estate investments, experts say.
The Indian REITs Association, which includes Brookfield India Real Estate Trust, Embassy Office Parks REIT, Mindspace Business Parks REIT, and Nexus Select Trust, has welcomed this long-awaited move, as it makes REITs a more effective investment instrument.
Brookfield India Real Estate Trust is a leading real estate investment trust in India.
Embassy Office Parks REIT is a leading REIT in India, listed on the Bombay Stock Exchange (BSE) and National Stock Exchange of India (NSE).
Mindspace Business Parks REIT is a leading REIT in India, listed on the BSE and NSE.
Nexus Select Trust is a leading InvIT in India, listed on the BSE and NSE.
Cyril Amarchand Mangaldas is a leading law firm in India, providing taxation services to clients.
Knight Frank India is a leading real estate consultancy firm in India.
Frequently Asked Questions
What is the main benefit of the recent budget proposals for REITs and InvITs?
The main benefit is the reduction in the long-term capital gains (LTCG) holding period from 36 months to 12 months, aligning it with that of listed equity shares.
How will this policy change affect investors in REITs and InvITs?
It is expected to attract a broader investor base, increase transaction volume, and boost market liquidity.
What is the composition of a REIT?
A REIT comprises a portfolio of commercial real estate assets, mostly leased out.
What is the focus of InvITs?
InvITs focus on infrastructure assets such as highways and power plants.
How will the removal of the indexation benefit for long-term investments in immovable property affect REIT and InvIT units?
It is expected to give a boost to REIT and InvIT units, as investors may find these asset classes more attractive than direct real estate investments.
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