1 India Economic Overview (continued)
1.5 Policy Initiatives
The Government projects a GDP growth of 7.6% for FY15/16 based on numerous steps undertaken to further improve the
economic situation which have been highlighted below:
•
Real Estate Investment Trusts (REITs):
The government has allowed REITs as eligible financial instruments under
the Foreign Exchange Management Act (FEMA) in India. The introduction of REITs in India, will provide access
to additional funding for developers and a structured and transparent commercial real estate market, resulting in
better valuation of properties.
REITs will also provide retail investors an opportunity to participate in India’s growing commercial realty market.
Demand from institutional investors will also be strong as REITs are formally organised, and regulated.
To promote REITs in India, the Indian Government has proposed various amendments with regards to MAT. The
exchange of shares in SPVs with units of the REITs is not considered as a transfer and hence it is not subjected
to capital gains tax. However, MAT on capital gains is payable at the time of transfer of the units to an investor.
Additionally, in the recent Union Budget, the finance minister, proposed an exemption on levy of Dividend Distribution
Tax in respect of distributions made by SPV to the business trust. The proposed exemption will ensure that dividend
received by the business trust and its investor shall not be taxable in the hands of trust or investor. This exemption
is provided that REIT is a 100% holder of the nominal value of equity share capital of such SPV company.
•
Real Estate (Regulation and Development) Bill:
The Union Cabinet has approved amendments proposed in the
Bill that aims to provide a uniform regulatory environment, to protect consumer interests, help speedy adjudication
of disputes and ensure orderly growth of the real estate sector.
•
Streamlining Land Acquisition Process:
Land Acquisition Bill has been referred to a joint parliamentary committee.
The Bill outlines the process to be followed when land is acquired for a public purpose. The Bill is expected to bring
transparency to the process of land acquisition, for the purpose of setting up factories or buildings, infrastructural
projects and assures rehabilitation of affected land owners. The legislation is expected to benefit the industry as
well as land owners, as the Bill provides provision for two times compensation in urban areas and four times in rural
areas, in comparison to the circle rate. The valuation guidelines will be decided by the local government on the
basis of average sale price of land for the last 3 years or last 3 months whichever is higher.
•
Rollout of the Goods and Services Tax (GST):
The GST implementation has been pushed forward and is expected
to come into effect during FY16/17. This will create a common national market and replace a plethora of indirect
taxes across the country. It will also have a direct bearing on the warehousing sector, as one can expect developers
to aim for consolidating smaller warehouses into larger ones and shift their strategy from mere tax considerations
to operational efficiency.
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INDIA Economic and Commercial Real
Estate Overview
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ASCENDAS india trust ANNUAL REPORT
2015/2016
