The Confederation of Indian Industry (CII) has urged the government to make commercial trusts such as REITs and InvITs even more attractive to foreign and domestic investors. This can be done by reducing the holding period of REIT and InvIT units to 12 months to be classified in the long term at par with listed securities, recommended the CII in its pre-budget note submitted to the Ministry of Finance.
Currently, investments in REIT and InvIT units are only sustainable by holding the investment for a minimum of 36 months compared to a period of 12 months prescribed for an investment in listed securities. Such a long period deters investors from considering investing through commercial trusts given the higher tax rate applied when the gains are short-term in nature, the CII said.
The industry chamber pointed out that REITs and InvITs are believed to play a major role in the success of the government’s ₹ 6 lakh crore “National Monetization Pipeline”.
The holding period for the direct holding of real estate and shares of unlisted companies is two years while the indirect holding through REIT / InvIT is three years leading to tax distortion, the CII
“To increase the attractiveness of these investments for foreign and domestic investors, they should be accorded the same treatment as listed equity instruments,” said the CII pre-budget memorandum.
Indian REIT / InvITs are now an integral part of the capital market ecosystem and with multiple successful fundraisers India has now established itself as a successful REIT / InvITs market. In addition, recently the Gift-City regulator IFSCA has now authorized REITs and InvITs located around the world to register with the International Financial Services Center in India.
At the same time, in a separate recommendation, CII also suggested that dividend tax rates for residents be lowered depending on the regime available to non-residents.