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Business Trust in India is a new concept drawn on the lines of a similar concept prevalent in the Singaporean economy.
Contents
History
Historically, even in countries such as the US and Singapore, it has taken significant time for REITs to pick up.
Objective
Real Estate Investment Trusts (REITs) aimed at attracting funds in a transparent manner into the real estate sector.
Types
There are two types of Business Trusts which can be formed in India.
Real Estate Investment Trusts (REITs)
A REIT, structured as a real estate counterpart to mutual funds, allows small investors to invest in a diversified portfolio of rent-yielding realty assets. Specialist REITs like Alexandria and Prologis focused on healthcare research and industrial assets have come of age in the US. The total estimated rental income potential of commercial Grade A stock in top eight Indian cities is ₹518 billion (US$7.7 billion) by 2019, according to global real estate consultancy Cushman & Wakefield.
Infrastructure Investment Trusts (InvITs)
It is almost same as Real Estate Investment Trust. The only difference is that the investment done here by the business trust is in infrastructure like roads, bridges, etc.
SEBI guidelines
The guidelines, approved by its Sebi board, have kept the minimum requirement for asset sizes permitted to be listed in India at ₹5 billion (US$74 million). The minimum issue size of the initial public offer shouldn't be less than ₹2.50 billion (US$37 million).
Taxation
As a benefit, any dividend would be tax exempt in the hands of the business trust and the dividend component of the income distributed by the business trust would also be exempt in the hands of unit holder.