The new Securities and Exchange Board of India dispensation under chairman C B Bhave looks all set to carry on from where M Damodaran left off.
Senior officials of SEBI met with a team from the real estate committee of the Federation of Indian Chambers of Commerce and Industry on Thursday.
They later made about 15 suggestions, meant to make clear certain characteristics relating to the draft guidelines for real estate investment trusts put out by the regulator on December 28, 2007, when Damodaran was chairman.
One of the key suggestions was to make the tax structure on REITs favorable to investors. With REIT ordered to distribute 90 percent of the income they create as dividends, the view is that there should only be a dividend distribution tax, to be paid by the real estate investment management company, and not the investors.
REITs are fundamentally instrument that allows one to buy units of various properties and capture returns these properties generate, just like a mutual fund allows one to capture the returns of a pool of stocks.
By definition, REITs are also mandated to invest in income-generating property, as opposed to real estate funds that aim to capture the capital appreciation from projects they invest in.
From this, follows the second recommendation. While, according to the SEBI rules, income-generating property would confine investments to commercial projects, FICCI has suggested that there be committed REITs for affordable housing projects as well, so that it gives a much-needed boost to the housing section.
