NAREDCO urges Centre to withdraw tax on the dividend

NAREDCO urges Centre to withdraw tax on the dividend received by InvIT/REIT Unit holders, return to a single stage taxation structure

Move vital to keep the product attractive to attract both foreign and domestic capital inflows
Dual taxation to encourage investors and sponsors to look at foreign InvITs and REITs jurisdictions

Mumbai, February 11^th, 2019: 

National Real Estate Development Council (NAREDCO), an apex body, formed under the aegis of Ministry of Housing & Urban Affairs, has urged the Centre to withdraw tax on the dividend received by InvIT/REIT Unit holders and provide InvITs / REITs with a single stage taxation structure as is currently available under the prevailing regulations, to keep the product attractive to attract both foreign and domestic capital inflows.

In a letter to Economic Affairs Secretary Shri. Atanu Chakraborty, NAREDCO recommended that continuation of dividend exemption in the hands of the Unitholders will help in destressing the banking system as InvITs and REITs would be able to raise equity funds, which could replace the debt funds. Successful InvITs and REITs would make the infrastructure and commercial real estate sector more robust and attract larger employment, which will help in revival of the economy and job creation which has been the focus of this government.

Dr. Niranjan Hiranandani, National President, NAREDCO, said, “Government’s objective underpinning the taxation framework for InvITs / REITs was to provide for a single level of taxation on the income earned on the underlying assets.  If the proposed amendments in relation to InvITs / REITs were to be implemented, the basic design principle of a single level of tax on income of the underlying assets held by InvITs / REITs would be compromised.”

“Instead of a single level of tax, income from the underlying assets would be subject two levels of taxation – once at the level of the SPV; the second level of tax would apply to the unitholders, when the post-tax income of the SPV is distributed by the InvITs / REITs to the unitholders,” he added.

Mr. Rajeev Talwar, Chairman, NAREDCO, said, “Policy stability is important to create a conducive investment environment. Dual taxation and an inefficient tax regime would encourage investors and sponsors to look at foreign InvITs and REITs jurisdictions for listings which offer single level taxation and stability of tax framework. All key international jurisdictions like the US, the UK, Singapore, etc. offer single level tax framework for InvITs and REITs and therefore have attracted huge investments from across the globe.”

The Finance Bill, 2020 has imposed tax on the dividend distributed to unitholders of the InvITs & REITs in the hands of the Unit holders. The Bill aims at moving the incidence of tax on dividend from the companies to the recipients.

InvITs / REITs as a platform has globally generated huge investment opportunities and the cumulative market capitalization is approaching USD 2 trillion. Of the Grade A office space stock of over 500 million square feet in India, as per JLL Research, 294 million square feet of office space stock would be eligible for REITs in India. This would translate to potential investment of USD 35 billion. Besides there are many Infrastructure assets including roads, ports, telecom assets, power assets, railways, etc. that could be listed as InvITs.

About  NAREDCO:

National Real Estate Development Council (NAREDCO), under the aegis of Ministry of Housing and Urban affairs, Government of India, is the apex body of real estate sector at National level representing all spheres of stakeholders engaged in various aspects of real estate development.  ShriHardeep Singh Puri, Hon’ble Union Minister of State (Independent Charge) for Housing and Urban affairs is its Chief Patron and Six Joint Secretary level officers from Central Govt. and Central PSUs are on its Governing Board. Housing and Urban Development Corporation (HUDCO), National Housing Bank (NHB), National Building Construction Corporation (NBCC), BMTPC, DDA, MP Housing, IRCON International, Tamil Nadu Housing Board, LIC HFL, PNB HFL, HDFC, Yes Bank, SBI, Shriram HFL, Indiabulls HFL, Cement Manufacturers Association and Arora& Associate Realty, besides leading developers like DLF, K Raheja Corp, Mahindra Lifespace, Max Estates,  Hiranandani, Prestige Estate Project Ltd., K Raheja Construction, Tata Housing, M3M India, Doyen Construction, Ekta Housing, Hotcrete Infrastructure, Tulip Infratech, Omaxe, Raheja Developers, Godrej Properties, Adani Township and Real Estate Company, Ambience Developers & Infrastructure, Hinduja Realty, Parsvnath, Ansal Housing etc are the members of NAREDCO.

Objective of NAREDCO interalia include promotion of housing and real estate sector in India and inculcate transparency and accountability in real estate business. NAREDCO and its state chapter work in close cooperation with Central and State Government for the development of real estate sector

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