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REITs in India - A prescription for regulatory inoculations and booster shots

In our previous piece , we had gazed into our crystal ball for predictions on the future of REITs in India, specifically in light of the ongoing Covid-19 pandemic and its aftermath. However, putting the largely untameable forces of macroeconomic factors, sectoral outlooks and market perceptions aside, there are some regulatory changes which, if introduced by the relevant regulators in a timely manner, could provide the real estate sector and specifically, REITs in India, with the necessary shot in the arm to thrive in the times to come. Set out below is a short wish-list.
Continue Reading REITs in India: A prescription for regulatory inoculations and booster shots

COVID-19 - Impact on Real Estate

With a lot of disruption and backlog due to coronavirus, all industries, along with the real estate sector, have taken a massive hit. The year 2019 was not such a progressive year and everyone was counting on 2020 to recover and improve from last year’s lows. However, the real estate sector is in a deep standstill on the back of the global economic crisis, coupled with the COVID-19 situation.

This scenario calls for anyone to take precautions and due to restrictive movement because of the travel ban and the stock market crash, developers for one are not looking to take any chance in blocking their money in launching any new projects. At this point, one of the challenges being faced by them is the impact on contracts/agreements due to COVID-19, which are currently in motion/existence. The question being raised is whether the COVID-19 pandemic calls for a force majeure consideration in the existing contracts. Force majeure clause acts as a protection to parties wherein due to any unforeseen circumstances, either of the parties are unable to fulfil their commitment as per the agreed terms and conditions of the contract. To put it simply, due to any acts of god such as fire, flood, war, etc., parties are unable to perform their part as it is not reasonably within the control.
Continue Reading COVID-19: Impact on Real Estate

 Post-Listing Frameworks for REITs

REIT IT RIGHT

An eight-part series covering the commercial and legal considerations of REIT listings in India. The previous parts can be accessed here – Part 1, Part 2, Part 3, Part 4 .

Investor protection forms the bedrock of securities laws frameworks around the world with securities regulators putting in place meticulous and stringent governance, reporting as well as compliance frameworks for listed entities. The Indian securities regulator  has also prescribed a labyrinthine set of laws for post-listing reporting and corporate governance compliances by listed companies.

In stark contrast, however, the present regulatory framework for Real Estate Investment Trusts (REITs) in India offers limited guidance on post-listing compliances by listed REITs, mandating few compliances (mainly in relation to financial reporting, annual and half-yearly disclosures and investor grievances) and remaining silent on the applicability of a vast number of other obligations (including in relation to prevention of insider trading, takeovers and acquisitions, open offers etc.) which are typically applicable to listed companies.
Continue Reading Part V – Post-Listing Frameworks for REITs – A Giant Jigsaw with many a Missing Piece

mplications of the Finance Bill, 2020, on INVITs, REITs and its Unitholders

The Finance Minister, Nirmala Sitharaman, presented the Union Budget 2020-2021 on February 1, 2020 and consequently, introduced the Finance Bill, 2020 (“Bill”) in the Lok Sabha. The Bill comprises the financial proposals, including taxation related proposals, to amend the provisions of the Income-tax Act, 1961 (“Income-tax Act”) for the financial year 2021.

The Income-tax Act comprised provisions in relation to the taxability of, and exemptions available to, infrastructure investment trusts (“InvITs”) and real estate investment trusts (“REITs”, together with “InvITs”, referred to as “business trusts”) registered with the Securities and Exchange Board of India under the Securities Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014 (“InvIT Regulations”) or the Securities Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014 (“REIT Regulations”), respectively.
Continue Reading Implications of the Finance Bill, 2020 on INVITs, REITs and its Unitholders

  Taxation of REITs in India

 

*An eight-part series covering the commercial and legal considerations of REIT listings in India. Click here to read Part III.

The Government started putting in place a framework for taxation of business trusts even before the regulations governing Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) were notified by the Securities Exchange Board of India (SEBI). This was not without reason – progressive regulations and tax reforms have influenced the progress of REITs globally, with REIT markets witnessing sudden growth spurts in countries such as Singapore and Hong Kong almost immediately following favourable tax amendments.

Closer home, five years and multiple amendments later, the Indian tax regime for REITs is a complex proposition and comes with a wishlist from nearly all stakeholders involved in a typical REIT. With Indian real estate likely to provide investment opportunity worth up to USD 77 bn through REIT-eligible commercial office and retail properties across India’s top seven cities by 2020[1], there can be no better time to look at some of the key issues.
Continue Reading Part IV – Taxation of REITs in India

Foreign Portfolio Investor - Corporate Debt - Voluntary Retention Route

As the Indian economy has grown over the years, so have the means of raising foreign debt by Indian companies. What began with limited investment channels for foreign banks and certain qualified institutional investors, has now flourished into a robust foreign debt investment market. Based on the commercial considerations driving a deal, Indian corporates can now raise ECBs under multiple tracks, issue various kinds of rupee denominated bonds, or avail of monies through fund structures such as alternative investment funds (AIFs) and real estate investment trusts (REITs).

Added to this mix is the foreign portfolio investment (FPI) route. What sets FPI apart is the degree of commercial flexibility it accords to investors and companies. For example, end-use and pricing norms applicable to FPI investments are relatively relaxed. Because of this, FPI is often the preferred option for raising debt, particularly short-term debt and working capital funding requirements.[1]
Continue Reading Investment through the Voluntary Retention Route: Fresh Push for FPI in Corporate Debt?