India's capital markets
regulator on Sunday approved rules for the creation of real-estate investment
trusts and infrastructure-investment trusts in the country.
The
step comes a month after Finance Minister Arun Jaitley said these trusts would
be given a tax pass-through status, meaning they wouldn't have to pay any
federal taxes as long as they pass most of their income to shareholders in the
form of a dividend.
Industry experts welcomed the
rules issued Sunday by the Securities and Exchange Board of India, saying that
real-estate and infrastructure trusts will help provide a new source of funding
for developers and investors in infrastructure projects.
"We
expect this to be a positive move for the Indian capital markets and could also
free up some liquidity for real-estate and infrastructure players," said
Bhairav Dalal, associate director at PricewaterhouseCoopers in India.
The
rules finalized Sunday state that only commercial properties, such as office
buildings can be part of a REIT, and all REITs have to be listed on a stock
exchange.
To be
eligible for listing, the value of the assets owned or proposed to be owned by
a REIT should be worth at least 5 billion rupees.
REITs
will be required to distribute not less than 90% of their net distributable
cash flows to investors at least every six months.
Under the rules, at least 80%
of the value of the REIT's assets must be in properties that are completed and
generating revenue. A REIT can invest only 10% of the value of its assets in
properties that are under construction, SEBI said. REITs can also invest a
small portion in other securities like mortgage-backed securities and money
market funds.
Meanwhile,
infrastructure investment trusts will own infrastructure projects. These trusts
may or may not be listed on stock exchanges, depending on the kind of assets
they own.
Source: The Wall Street Journal
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