APREA hails birth of Indian REIT market

APREA hails birth of Indian REIT marketThe Asia Pacific Real Estate Association (APREA) has welcomed the Government of India’s proposal to foster a REIT market, which it contends will improve the transparency and professionalism of the Indian real estate market.APREA, a non-profit body representing the real estate investment industry in the Asia-Pacific region, has advocated for the establishment of a real estate investment trust (REIT) market in India for many years.APREA CEO Peter Verwer praised the Modi government’s decision, announced as part of its maiden budget, calling it an initiative that will herald the birth of a new investment class in India. He also said it will help spur economic growth by attracting much-needed capital for India’s nation-building programs.The creation of infrastructure investment trusts (InvITs) and REITs, Verwer says, will provide retail and institutional investors with a regulated platform from which they can invest in income-generating real assets, increase foreign capital inflows into India and boost capital investment.In his budget statement, the Indian Finance Minister endorsed draft REIT regulations already released by the Securities and Exchange Board of India (SEBI).APREA, which has been working closely with SEBI, said it looked forward to further constructive dialogue with Indian authorities to ensure the final REIT model meets its goal of economic growth. Among the matters APREA wishes to discuss is the Indian government’s proposed approach to taxation rules. APREA is concerned that the proposed tax structure for REITs could result in multiple levels of tax for domestic investors.According to APREA, the proposed treatment of dividend distribution tax (DDT) at SPV level and capital gains tax (CGT) on the sale of units of REITs by sponsors would decrease the appetite for REITs. It suggests that the Modi government establishes a level playing field between REITs and other entities when it comes to taxation.APREA has led calls for a single-level tax in line with international practices that would ensure government revenue is not diluted but would likely increase levels of economic activity, thus helping to lift overall tax revenues.