Why the Indian tax framework leaves much to be desired
A Real Estate Investment Trust or a ‘REIT’ is a collective investment vehicle that invests in a diversified pool of professionally managed, investment-grade real estate. In its simplest form, a REIT provides ownership of a portfolio of properties in units that are held by investors as a way of securitising property. While any income-generating property could be held in a REIT, assets typically held by REITs comprise office, residential, retail, hospitality and industrial or logistics property.
REIT markets first emerged in the 1960s in the US and the market capitalisation of US REITs has since soared from $5 billion to roughly $900 billion in 2014. The US was followed by Australia in the early 1970s with a number of Asian countries introducing REIT regulations in the late 1990s and early 2000s. Almost 30 countries have operating REIT markets, a further 12 have REIT legislation in place, while a number of other countries have such legislation under active consideration. India is a latecomer to this market; REIT regulations were framed by the Securities and Exchange Board of India (Sebi) in September 2014 while the taxation framework was incorporated in the income tax law by the Finance Act 2014.
While REIT regulations vary across countries, all REIT regulations share certain common features: