Budget 2023 has dealt a body-blow to REITs and InVITs. It has proposed to make 'repayment of loans' from REITs/InVITs taxable as 'other income'. This means a lot more tax on investors. Here's how. Brilliant story and graphic by @SatyaSontanam
REITs or Real Estate Investment Trusts invest in commercial real estate. InVITs or Infrastructure Investment Trusts invest in infrastructure projects like toll roads and transmission lines. They collect rent from these assets and distribute their earnings to investors. Simple?
It never is, with #tax. Rather than buying assets, REITs/InVITs often lend money to special purpose vehicles or SPVs (essentially companies) who are executing these projects. The SPVs repay the debt over time and REITs in turn pass on the repayments to their investors.
So far this was considered tax-free. But the industry fell too much in love with this structure. Tax-free loan repayment a major part investor returns (in some REITs) and investors were happy. Win-Win, until the Finmin came knocking.
The story doesn't end there. REITs and InVITs locked in a lot of leases when interest rates were low 1-2 years ago. Now rates have shot up and suddenly their rental yields look unappealing. This is a double whammy. Full story here: livemint.com
Loading suggestions...