The new Securities and Exchange Board of India (Sebi) dispensation under chairman C B Bhave looks all set to carry on from where M Damodaran left off.
On Thursday, senior officials at Sebi met with a team from the real estate committee of the Federation of Indian Chambers of Commerce and Industry (Ficci).
The latter made about 15 recommendations, meant to clarify certain aspects relating to the draft guidelines for real estate investment trusts (REITs) put out by the regulator on December 28, 2007, when Damodaran was chairman.
One of the key recommendations was to make the tax structure on REITs favourable to investors. With REITs mandated to distribute 90% of the income they generate as dividends, the thinking 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 essentially instruments that allow 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 that follows the second recommendation. While, according to the Sebi guidelines, income-generating property would confine investments to commercial projects, Ficci has suggested that there be dedicated REITs for affordable housing projects as well, so that it gives a much-needed boost to the housing segment.
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