NEW DELHI: Real-estate firm Supertech is looking to pool six of its operational and rented out malls to list them as a real estate investment trust (REIT) in India to raise close to Rs 500 crore in 2015-16, its chairman said. The company has 2 million sq ft of retail space spread across the six malls — two in Ghaziabad and one each in Noida, Meerut, Haridwar and Rudrapur, RK Arora said.
It also has a few malls under construction. Supertech is in talks with a Singaporean company that has experience in setting up REITs in various markets, Arora said. "We are at an initial stage of listing our assets," he added. REITs own properties and their rental income is distributed among investors. For investors, they offer high dividend along with a liquid option to invest in real estate.
Several real-estate firms in the country and some private-equity funds have shown interest in setting up REITs since stock market regulator Securities and Exchange Board of India notified rules for listing of these trusts in September last year with a view to attract more funds in a transparent manner into the real-estate sector.
But no REIT is listed in India, partly because of a lack of clarity on taxation. To encourage local listing, the government in its budget for 2015-16 decided to do away with capital gains tax for sponsors at the time of listing of REITs and allow pass-through (means REITs don't have to pay tax on the income - it will be levied on the income received by unit holders) on rental income.
Capital gains tax, however, will be applicable for direct transfer of assets to these trusts. The budget didn't offer clarity on dividend distribution tax. Real-estate players such as DLF, Embassy Office Parks, RMZ, Ambience and several others, as well as PE firms like Blackstone, Kotak Realty Fund and Red Fort Capital are known to be looking at listing their assets as REITs.
They have built up or acquired rent-producing assets over the years. REITs could attract as much as $1 billion (Rs 6,280 crore) in 2015 following the tax benefits announced in the budget, said property consultancy JLL India. Experts, however, point out that more exemptions can be made by the government to make this segment more attractive to realty players.
"Capital gains tax was exempted on transfer of SPV (special purpose vehicles set up to carry out projects) shares by sponsors but minimum alternate tax (MAT) is still applicable. If MAT is exempted, it will make REITs far more attractive to a developer," said Shweta Aggarwal, director at BMR & Associates.