MUMBAI: The third attempt by market regulator SEBI to revive the much anticipated Real Estate Investment Trust platform has hit a roadblock yet again. And this time it is the upcoming elections that have played spoilsport.
Even as three days remain for receiving comments on SEBI’s draft regulations on REITs, the Finance Ministry has ruled out for now the introduction of any enabling provisions in the Income Tax Act, 1961 to allow tax incentives of any kind before the post-election Budget in July next year.
A senior Finance Ministry official said: “The stage to discuss tax incentives comes only after a concrete policy on REITs is formulated. But given the upcoming election year, any tax benefits for REITs have been postponed to the new Budget in July and will come up for discussion only after March next year. Till then, there would be no amendments made in the Income Tax Act to grant any tax incentives for REITs.”
Non-inclusion of these tax incentives would be the main stumbling block in the smooth implementation of REITs. The tax incentives demanded by the industry include exemption of capital gains tax for transfer of assets made by the sponsor (usually a developer or a private equity fund) to the REIT special purpose vehicle (SPV), one-level taxation of gains either at the SPV level or at the recipient level and one-time waiver of stamp duty.
In addition, the stakeholders are also demanding that when REIT units are traded on the exchanges they should attract the same Securities Transaction Tax and long-term and short-term capital gains tax as applicable to equities.
When asked for an update on REITs on Monday, SEBI Chairman U. K. Sinha said the market regulator would push for grant of incentives from the tax authorities to make REITs work.
“One thing is clear, that is, if REIT has to work it has to be made tax efficient. Otherwise it will not work. We will seek tax benefits from the concerned authority for the same.”
A REIT is a company or a group that owns and manages real estate properties on behalf of investors, much like shareholding in a company. REITs are beneficial to both investors and the real estate industry. SEBI had released the draft guidelines for REITs on October 10 and has invited comments to be submitted latest by October 31.