REITs guidelines: Investors with even Rs 2 lakh can earn from completed realty projects

Having cleared a long-pendingindustry demand for creation of Real Estate Investment Trusts
(REITs), regulator Sebi today said that the new norms wouldhelp entities with at least Rs 2 lakh investment to earn fromcompleted real estate projects.

The new norms for REITs, as also for InfrastructureInvestment Trusts (InvITs), were cleared by Sebi’s boardtoday, while final notifications would be issued soon to makethe norms effective in a month or two.

“The idea is that even if somebody can invest as low asRs 2 lakh, such a person can get the benefit of the incomefrom the completed projects,” Sebi Chairman U K Sinha said.

REIT guidelines would allow creation and listing ofsuch trusts and their units can be traded on the stockexchange like equity shares.

“Primarily REIT is with regard to completed projects,revenue generating projects,” Sinha said.

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“As you may be aware that the government in the FinanceBill has already provided for tax treatment for REITs andInvITs. So with those tax treatments in place and Sebiregulations in place we can hope that there will be someprogress in the real estate market and in the infrastructuremarket,” he added.

Explaining the modalities, the Sebi chief said that if"somebody creates a Special Project Vehicle (SPV) and has madean investment in an real estate project, units of that will beused to form the REIT and that Trust will issue shares".

“On tax pass through, we have realised that when the SPVis transferred to the REIT, at that stage there will be a taxdeferral. That means at that stage, tax will not have to bepaid. When the investor in that original project SPV finallydisposes of his property at that stage he will be paying thetax. All that is provided in the Finance Act.

“Fortunately the good thing is that tax treatment hasalready preceded our regulation drafting today … We haddecided we will wait for tax treatment to be cleared and thetax treatment what was finally cleared in this Budget and nowfinally we have come with our regulations,” Sinha said.

When asked if the new norms can come into effect byOctober, the Sebi Chairman said, “We will take about may be amonth or two months. So October 1 is a reasonable time period(for notification).”

PTI