SEBI demands tax concessions on real estate investment trusts

Seeks clarity on taxation of FIIs in infrastructure corporate bonds

Indivjal Dhasmana  |  New Delhi 

June 21, 2014 Last Updated at 12:18 IST

Ahead of the Budget, the Securities and Exchange Board of India (SEBI) has taken up with the government taxation issues for the proposed Real Estate Investment Trusts as well infrastructure  corporate bonds. 

"We have come out with a discussion paper on Real Estate Investment Trust and are hoping to get it implemented soon.  Our rules are ready, we have taken up with the government that these must be given a pass-through certificate status so far as tax status is concerned," SEBI chairman U K Sinha said at a summit organised by Skoch Consultancy Services. 

Sinha expressed the hope that the government will consider the demand favourably. 

"The moment there is a clarity on that, we will come out with our regulations," he said.

Sinha also  wanted a tax clarity on infrastructure corporate bonds for  foreign institutional investors (FIIs). 

"In the infrastructure sector, if a bond is issued and there is a FII, which is investing in that, what is the level of tax with that entity? If  it is vastly different from the withholding tax which is imposed on others, should there be different set of rules for FIIs and domestic institutional investors? These are the issues we are looking at," Sinha said. 

He  also  wanted the government to enact a  law  to replace  an ordinance which provides  SEBI the regulatory jurisdiction of  all  unregulated entities  that take  deposits of at  least  Rs  100  crore.  

"An ordinance is an ordinance. It has a limitd life. I am hopeful that the government will consider that this ordinance is converted into an act very soon," he  said.    

The SEBI chairman said there are still a large number of unregulated fund raising activities. These are coming under various names--chit funds or nidhi companies, housing schemes. 

"That menace has not still been fully controlled."

Sinha disclosed that  since the  ordinance  was promulgated, SEBI has taken action in more than 25 cases. "We have passed our orders, we have stopped them from raising money." Source: Business Standard

Indian realty industry to almost double to $140B by FY17

BY  Pooja Sarkar, VCCircle

The industry, which had been growing at around 8 per cent annually during 2009-11, saws a 6.5 per cent deceleration in 2012-13.

The Indian real estate industry is expected to grow to approximately $140 billion by FY17, said a research report on real estate released by advisory firm Ernst $ Young and industry body FICCI. The report said, according to industry estimates, the size of the Indian real estate market was close to $78.5 billion in FY13.

Niranjan Hiranandani, chairman of FICCI’s real estate committee and managing director, Hiranandani Constructions Pvt. Ltd, said, “Mumbai urgently needs change of infrastructure with the support of government and also reforms in taxation, with 34 per cent of cost of an affordable house going out as taxes.”

The realty industry, which had been growing at around 8 per cent during 2009-11, saw a 6.5 per cent deceleration in 2012-13 primarily due to the sluggish domestic growth, rising input costs and negative global economic sentiments.

The sector’s major growth driver has been the pumping of capital through foreign direct investment (FDI) route. Between April 2011and July 2013, the sector attracted FDI of close to Rs 100,000 crore. The report, however, said the volume of FDI into the sector has been declining.

Even for private equity funding, the sector saw its peak in 2007 when $6.8 billion came in. In 2012, the industry attracted $1.7 billion from limited partners in realty projects across the country, as per the report.

For the first half of the current calendar year, the realty industry has seen investment of close to $1.4 billion and industry experts indicate that this year would be one of the better years compared to last four years.

With negligible sales and developers’ reluctance to bring down prices of properties, even banks’ credit exposure to the real estate and housing sector declined from 10 per cent as a percentage of gross bank credit in FY10 to 7.9 per cent in FY13. While bank construction finance continues to be the cheapest source of funding, another instrument which has caught attention of developers is raising money through non-convertible debentures (NCDs). Reflecting this trend, NCDs worth $4.2 billion were issued in 2012 compared with $3.8 billion in 2011.

The realty industry recently witnessed a few big-ticked buyout transactions in commercial office space by private equity funds. Over the last three years, it has attracted investment of $1.14 billion in commercial office space portfolio development.

(Edited by Joby Puthuparampil Johnson)

SEBI to Probe Allegations Leveled Against DLF

India’s capital markets regulator said Thursday it will investigate allegations leveled against real estate company DLF Ltd. that it violated certain provisions of disclosure and investor protection rules during its initial public offering in 2007. The investigation by SEBI–the Securities and Exchange Board of India—follows a complaint filed by Kimsuk Krishna Sinha, alleging that Sudipti Estates Pvt. Ltd. is an associate company of DLF and had defrauded him of about 340 million rupees. 

DLF has maintained that the group or its units had no connection with Sudipti. DLF and Mr. Sinha couldn’t be reached for comment Thursday. The matter was challenged by Mr. Sinha in the Delhi High Court, which recently ordered the matter to be investigated by SEBI. According to a SEBI statement issued late Thursday on its website, an officer will soon be appointed to investigate the matter.

SEBI wholetime member Prashant Saran said in the statement: “If any violations are brought out in the investigation, the Securities and Exchange Board of India shall proceed in accordance with law.”