The budget presented by finance minister Arun Jaitley on 29 February allows a true, full pass-through for real estate investment trusts (REITs) and infrastructure investment trusts.
It does so by removing the dividend distribution tax (DDT) at the special purpose vehicle (SPV) level under a business trust (100% owned with exceptions). Assets being held in an SPV is a fact and a regulatory necessity in Indian circumstances. Hence, the proposal to remove DDT could substantially help the establishment of business trusts in India as vehicles where infrastructure and real estate developers can partially exit their revenue-generating assets such as commercial buildings, special economic zones, information technology parks, roads, renewable and other power projects, transmission lines, and list the business trusts so created on Indian stock exchanges to raise perpetual capital from a very new set of investors who want steady, regular yields backed by stable assets and some growth.
There is a great need for such instruments in the Indian marketplace and could be used by domestic and foreign pension funds, high-net-worth individuals, insurance companies, long-only funds, etc.
