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Budget 2024 has brought cheer to the REIT investors. REITs will now be considered as equity funds for taxation purpose.
With this, REITs will be taxed at 12.5% for long term capital gains (LTCG) and 20% for short term capital gains (STCG). Also, LTCG in REITs is reduced from 36 months to 12 months.
Aravind Maiya, CEO, Embassy REIT said, “We welcome the reduction of holding period for long-term capital gains from 36 to 12 months puts us at par with listed equity shares, further popularizing the REIT asset class in India. Over the past five years, REITs have transformed the Indian real estate landscape, attracting around 2.3 lakh investors. The four listed REITs today have over Rs 1.4 lakh crore in assets under management and have distributed over Rs 17,000 crores. This move will further enhance the attractiveness of the REIT product, increasing investor participation.”
Seconding Aarvind, Ramesh Nair, CEO, Mindspace REIT said the proposal will improve the liquidity in the real estate sector. He said, “The finance minister announced several positive initiatives for the real estate sector, positioning cities as growth hubs and introducing a brownfield development framework. Key initiatives include transit-oriented developments in 14 cities, 100 new industrial parks with nearby labor housing, Rs 2.2 lakh crores for urban housing, stamp duty reforms, digitalization of land records, and Rs 11 lakh crores for infrastructure capex.”
Dalip Sehgal, Executive Director and Chief Executive Officer, Nexus Select Trust said that the move will help the industry attract investments. He said, “This step by the finance ministry aligns with the holding period for REITs and InvIT’s to qualify as long term capital asset. The holding period for these investments is now 12 months, instead of the 36 months earlier and are now in line with all other listed equities. This strong stance by the government echoes their commitment in REITs as an asset class and is certain to attract more investors."
Indian REITs Association (IRA) believes that the move will help increase investment in the sector and also create employment opportunities for people. The Indian REITs Association(IRA) said, “Previously, investors were required to hold units of business trusts for 36 months to qualify for the long-term capital gains tax rate. This extended holding period often acted as a barrier to investment flexibility and liquidity, particularly in the real estate sector. By shortening the holding period to just 12 months, the Union Budget fosters a more agile investment environment. Also, the various measures and initiatives announced will significantly support the growth of the infrastructure and real estate sectors.”