Budget 2024 to Boost Business Trusts, Including REITs and InvITs
The recent Budget 2024 holds good news for investors in business trusts, particularly Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). As per the budget, the long-term holding period for tax considerations in these asset classes will be made uniform with the rest of the equity market. This move is expected to bring significant benefits to the growing sector.
Uniform Taxation for Business Trusts
Speaking about the impact of the budget on business trusts, the CEO of IndiGrid, an infrastructure trust, Mr. Harsh Shah, welcomed the rationalization of taxation. Shah stated, “InvITs/REITs being taxed at parity with equities will offer investors uniform taxation to invest in superior risk-adjusted platforms. We believe that this will also enable InvITs and REITs to form part of indices and add significant liquidity.”
The real estate sector has already witnessed the listing of four REITs in India. Recent developments also include the establishment of a dedicated industry body named the Indian REIT Association (IRA), which aims to enhance the reach and impact of REITs in India. Adding his views, Mr. Aravind Maiya, CEO of Embassy REIT, expressed delight with the budget announcement, stating that the reduced holding period for long-term capital gains from 36 months to 12 months puts REITs on par with listed equity shares. According to Maiya, this move will further boost the popularity of the REIT asset class in India.
Boosting Investor Participation
Interestingly, the SEBI chairperson, Ms. Madhabi Puri Buch, has actively endorsed REITs as one of her “favorite products for the future”. Buch predicts that a combination of REITs, InvITs, and municipal bonds will reach the same popularity and scale as India’s equity markets within the next 10-15 years. This positive sentiment expressed by the regulator highlights the potential of business trusts as crucial investment vehicles to drive economic growth in the country.
After witnessing a steady rise in the number of investors in REITs over the past five years, with approximately 2.3 lakh investors participating in the four listed REITs, these tax reforms are expected to encourage even more investor participation. The uniform taxation treatment for REITs and InvITs will make them more attractive investment options, thus fueling growth and enhancing liquidity in the market.
Conclusion
The Budget 2024’s focus on business trusts, particularly REITs and InvITs, is expected to bring significant benefits to investors and the overall economy. By aligning the tax considerations for these assets with equity shares, the budget aims to enhance market participation and strengthen these investment avenues. With experts, industry bodies, and regulatory authorities expressing confidence in the potential growth of business trusts, the future looks promising for the sector.
Sources:
1. https://economictimes.indiatimes.com/markets/stocks/news/the-budget-is-positive-for-real-estates-time-will-tell-for-reits-debojyoti-mitra-jll-india/articleshow/93929307.cms
2. https://www.moneycontrol.com/news/business/personal-finance/budget-central-gives-boonso-redenominating-unitem-teamkim67-units-kotak-regift-have-being-left10052121-unitaze-rsremium14-reitsonet477843-insvariant.html
