Only REITs in this presentation, follow-up with InVITs will be uploaded soon.

1. Alternate source of funding for Indian Construction Sector:
REITs & InvITs
Thesis seminar on:
BY:
SHASHANK CHAHAR [AP16403]
ARIJIT ACHARYA [AP16416]
HARSH PADGIL [AP16432]
ANIRBAN CHANDRA [AP16462]
Under the guidance of
Dr. Medha Joshi

2. A brief overview of the presentation:
REITs
• What is a REIT?
• History of REITs: Timeline
• Benefits and Risks of investing in a REIT
• Comparative study of foreign REITs
• Evolution of REITs in India: Timeline
• SEBI Guidelines for REITs
• Tax implications
• Present scenario of Indian REITs
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3. Real Estate Investment Trusts
(REITs)
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4. What is a REIT?
 REIT, or Real Estate Investment Trust, is a company that owns or finances
income-producing real estate.
 REITs provide investors of all types regular income streams, diversification and
long-term capital appreciation. REITs typically pay out all of their taxable income
as dividends to shareholders. In turn, shareholders pay the income taxes on
those dividends.
 REITs are tied to almost all aspects of the economy, including apartments,
hospitals, hotels, industrial facilities, infrastructure, nursing homes, offices,
shopping malls, storage centers, student housing, and timberlands.
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5. Benefits vs Risks of Investing in REITs
BENEFITS
 Higher dividend (assumed)
 Portfolio Diversification
 Income secured by long leases VS.
 Liquidity (assumed)
 Professional Management
 Transparency
RISKS
 Growth at a slower pace
 May rely on debt
 Real Estate is a cyclical business
 Tax treatment
 Property taxes may rise
 Lack of Liquidity of Investment
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6. Evolution of REITs in India:
Timeline
Source: The Hindu, 25th July 2016
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7. Comparative study of foreign REITs
Source: JLL Report on REITs, 2016
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8. Structure
Offer & Listing
ofUnits
Valuation of
Assets
Manager
• Tobe set up as trust, registered under SEBI
• Relevant parties have been designated as trustee (register with SEBI), sponsor and manager.
• May raise funds form both residents as well as foreign investors (subject to guidelines specified by
RBI/govt.)
• Minimum subscription size to be INR 2 Lakhs per investor, and the unit size to be INR 1 lakh
• Minimum investors to be200
• Mandatory listing on recognised stock exchange within 12 days of closure of offer
• Full valuation including a physical inspection of the properties to be carried out at least once a year
• Valuer need to be independent from sponsor, manager and trustee and with minimum 5 years of relevant
experience in valuation of real estate.
• Valuation report to be submitted to designated stock exchange and unit holder within 15 days from the
receipt of such valuation report.
• Manager to have minimum net worth of INR 100 million
• Manager and its associates to have at least 5 years of specified relevant experience
• Minimum 2 key personnel to have at least 5 years of relevant experience
OVERVIEW OF SEBI REIT
REGULATIONS
Source: www.sebi.gov.in
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9. • REIT can have upto 3 Sponsors (each sponsor to hold at least 5% units).Sponsor to have minimum net
worth of INR 200 million on a consolidatedbasis.
• Should hold at least 25% of the total units of the REIT on post issue basis, which shall be locked in for a
period of 3 years from the date of listing
• Sponsor / its associates to have a minimum 5 years experience in real estate industry on individual basis
• Shall invest only in properties / securities in India
• At least 80 % of the value of the REIT assets to be in completed and rent generating properties and
prohibited to invest in vacant land /agricultural and / mortgages (other than mortgage backed securities)
and otherREIT’s
• Permitted to invest in properties through a SPV , subject to certain specified conditions.
• At least 75% of the revenue of the REIT (other than gains from the disposal of properties) to be from
rental, leasing and letting real estate assets all the times.
• At least 90% of the net distributable cash flows of the REIT to be distributed to the unit holders
• Aggregate consolidated borrowings and deferred payments net of cash & cash equivalents capped at 49%
of the value of the REIT asset
OVERVIEW OF SEBI REIT
REGULATIONS
Sponsor
Borrowings
Investment
Condition
Income &
Dividendpolicy
Source: www.sebi.gov.in
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10. Bird’s eye view of taxability at various levels in a REIT structure is tabulated below:
Entity IncomeStreams
Dividend/
Profit
Interest CapitalGain
Rental/ Other
income
SPV No tax on
receipt or
distribution
Not tax to be deducted On sale of asset:
Tax on capital gains on applicable rates, as per
holdingperiod.
Taxable at maximum
marginal rate
REIT No tax on
receipt or
distribution
In case received from SPV -
exempt u/s 10(23FC).
In case of distribution; tax to
be withheld by REIT @ :
 5% – NR
 10% – R
On sale of SPV’s shares/Capital Assets:
Tax on capital gains on applicable rates, as per
holdingperiod.
Taxable at maximum
marginal rate
Unit-
holder
Exempt Taxable at applicable rates
 5% – NR (tax withheld
would be available as
credit)
 At applicable rate– R
 On sale of units:
• LTCG – Exempt so long STT is paid
• STCG – 15%
 Holding period for LTCG: 36 months
Exempt
TAX IMPLICATIONS
Note: DDT=Dividend Distribution Tax, R=Resident, NR=Non Resident, LTCG= Long Term Capital Gains,
STCG = Short Term Capital Gains
Source: Section 115 UA, Income Tax Act,
Special provisions related to business trusts
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11. Comparison between REIT Structure:
India and US
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Structure of USREITs Structure of Indian REITs
Source: marketrealist.com & Grant Thornton Report, 2016

12. Present Scenario of REITs in India
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• Present REITable assets in India: USD 43-54 Billion
• Blackstone backed Embassy Office Parks Management Services Pvt. Ltd. Applied to SEBI for
REIT registration in 2016.
• Possiblitiy of India’s first REIT at the end of first quarter, 7 possible SPVs presently being
assessed for inclusion or exclusion in the REIT structure.
• Several decisions attracting companies:
• Removal of DDT in 2016
• Allowing REITs to invest 50% in holding companies
• Passing RERA in 2016
• MIT Centre for Real Estate and Propstack tie-up to form Office Realty rent indices for India for
Mumbai, NCR, Bengaluru, Pune, Chennai and Hyderabad based on past 12 years data.

13. ~THANK YOU~
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