The tax treatment of India’s new real estate investment trusts (REITs) regime should be changed to remove stumbling blocks to investment in the vehicles, a lobby group has said.
The Asia Pacific Real Estate Association (APREA) has called for greater tax efficiency for the newly-created Indian REITs and infrastructure investment trusts (InvITs).
In mid-August, the Securities and Exchange Board of India (SEBI) approved the creation of the two investment vehicle types, publishing its final regulations on them.
Peter Verwer, chief executive of APREA, said: “A significant stumbling block remains the tax treatment of REITs and InvITs.”
On balance, the rules were good, he said, but “they avoid most of the traps that befell several neophyte Asian — and European — REIT schemes”.
SEBI had listened to the industry and modified several aspects of its draft rules, he said, and these were now more business friendly.
The final set of norms in the rules lowered barriers to entering the REIT marketplace, and gave more flexibility over the capital management of trusts, he said.
As part of its lobbying to change the taxation of REITs, APREA is hosting Indian REIT regulators at meetings in Washington DC, Singapore, Sydney and Canberra.
Verwer said APREA applauded the Ministry of Finance for its REIT/InvIT frameworks, but insisted the proposed tax rules now needed to be thought through again.
This was particularly necessary in relation to dividend distribution tax at SPV level and capital gains tax on sales of REIT units by sponsors.
He said the investment vehicles were key to the economic growth plan of Indian prime minister Narendra Modi’s government, especially its ‘Smart Cities’ strategy.
APREA will continue working closely with officials in India to change tax arrangements on the vehicles, he said.