If you are an investor and looking for a new investment opportunity—offering tax-free returns in the form of dividend and capital gains—the Budget FY17 has opened up doors for the launch of the Real Estate Investment Trust (REIT) and Infrastructure Investment Trust (InvIT). REIT/InvIT is a structured business trust model facilitating entrepreneurs and corporates to monetise their capital locked in assets through issue of units to investors at large.
In India, generally an investor expects a yield of 8-9% tax-free in long-term savings plans or government bonds, or a similar yield if invested in debt mutual funds. Further, an investor could look at a higher yield of about 11-13% (taxable) by investing in unsecured non-convertible debentures (NCDs) or debt instruments of corporates and now units of REITs/InvITs.
So, what is REIT/InvIT?
REIT is an investment vehicle that allows both small and large investors to acquire ownership in real estate assets through purchase of units. Similarly, InvIT is an investment vehicle for owning undivided interest in other classes of assets such as hospitals, hotels, warehouses, shopping malls, roads, ports, etc. The capital markets regulator—Securities and Exchange Board of India (Sebi)—had already enacted REIT/InvIT regulations in September 2014, broadly covering a few aspects.
