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The capital markets regulator Sebi today pitched for tax incentives to woo investors into the proposed real estate investment trusts (REITs), which, it is felt, will go a long way in helping the cash-strapped companies raise funds.
"For REITs to be successful, they have to be tax efficient. We will ask the tax authorities to consider some incentives for the real estate investment trusts," Sebi Chairman Upendra Kumar Sinha told reporters on the sidelines of a conference on protecting capital market investors here.
"We will talk to the I-T department to make it happen," he added, but did not offer details.
About five years after issuing the first draft regulations for REITs, the Sebi on October 10 moved a step closer and issued draft guidelines to allow REITs.
This is expected to pep up the cash strapped realty sector with capital infusion in the form of REITs.
In its draft regulations relating to REITs, market regulator Sebi has broadly applied a framework similar to that of an initial public offers (IPOs), requiring listing of units issued by REITs. The regulator has also prescribed various norms, including those related to minimum offer size, public float, and size of assets.
REITs are proposed to be allowed to list on exchanges through IPOs and through follow-on offers and raise funds.
"REIT shall be set up as a trust under the provisions of the Indian Trusts Act of 1882," Sebi had said, adding however, they are not allowed to launch any schemes.
As per draft rules, only such entities would be allowed that have at least 90% investment in completed revenue generating projects.
The move is aimed at providing investment avenues for investors by way of trading units of REITs, similar to mutual fund and exchange traded fund structures for stocks, bonds and other securities.
The regulator said that REIT may raise funds from any investors, resident or foreign though initially, till the market develops, it is proposed that the units of REITs may be offered only to HNIs /institutions.
The draft norms comes as the real state sector witnessed rapid growth in recent years underlined by robust economic growth in the country.
Globally, framework for REIT exists in several countries including the US, Britain, Australia, Singapore, Japan and France.
In line with the nature of the REIT to invest primarily in completed revenue generating properties, "it has been mandated that at least 90% of the value of the REIT assets shall be in completed revenue generating properties."
