What are REITs?

REITs are similar to mutual funds. While mutual funds provide for an opportunity to invest in equity stocks, REITs allow one to invest in income-generating real estate assets.
How does an REIT work?
  • REITs raise funds from a large number of investors and directly invest that sum in income-generating real estate properties (which could be offices, residential apartments, shopping centres, hotels and warehouses).
  • The trusts are listed in stock exchanges so that investors can buy units in the trust.
  • REITs are structured as trusts.
  • Thus, the assets of an REIT are held by an independent trustee on behalf of unit holders.
Taxation structure:
  • Short-term capital gain tax is applicable for unit holders at the rate of 15%.
  • While interest is tax-exempt for REITs, it is taxable for unit holders.
  • The registration charges for every purchase and sale of property is still applicable.
Why in news?
SEBI planning to relax norms for ReITs :
  • SEBI is looking to make Real Estate Investment Trusts (REITs) more attractive to investors by allowing them to invest a large portion of funds in under-construction assets.
  • Besides, REITs would be allowed to have a larger number of sponsors, while regulations regarding the minimum public offer size and related party transactions could also be eased.
  • SEBI is also planning to remove curbs on the SPV to invest in other SPVs holding the assets, which in turn would allow REITs to invest in a holding company owning stake in SPVs



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