APART FROM THE TAX CHALLENGES, THERE ARE NON-TAX ISSUES ALSO
THAT MAKE THE INDIAN REIT UNATTRACTIVE
The Securities and Exchange Board of India (Sebi) recently
introduced the final regulations for real estate investment trusts
(REITs) and infrastructure investment trusts (InvITs). These
regulations come on the back of recent tax initiatives introduced
in the budget this year. While the initiative is indeed a positive
step, the tax measures governing REITs or business trusts (as they
are referred to in the Income-tax Act) do not offer much
encouragement, neither to the sponsor nor the unit holders.
From a sponsor's perspective, capital gains tax benefit has
been given only in cases where shares of the special purpose
vehicle (SPV) holding the real estate are transferred to a REIT
against units of a REIT, and not when real estate is directly
transferred to a REIT. By doing so, there is an unnecessary
corporate layer imposed between the REIT and the real estate
