Residential property owners? Know why house properties are left out from REITS

On account of low yield in the residential projects, lack of a sound and inclusive rental policy and illogical tax regime, Indian REITS (Real Estate Investment Trusts) has left out residential real estate from its ambit. The industry insiders say it would hit the Indian REITS as it makes it less attractive if compared with globally successful REITS.

Speaking on the aspect Shobhit Agarwal, MD & CEO – ANAROCK Capital told Zee Business online, "This is obviously not without good reasons. Lack of a sound and inclusive rental policy in India is one of the major hurdles for REITs in the residential segment. Countries like Singapore and the US have a defined rental policy which makes it easier for them to host residential REITs." 

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He said that the yields on residential projects in India hover between mere 2-3 per cent in the prime locales here - nowhere near those of developed countries. In short, low returns coupled with the overall negative hype that has followed the Indian residential sector in recent years have thus clearly negated its candidature for Indian REITs - at least in the foreseeable future.

Standing in sync with ANAROCK Capital views Rakesh Yadav, CMD, Antriksh India Group said, "Another area of difference is the taxation structure currently being proposed for Indian REITs. Like in the more developed countries with successful REIT platforms, India too must offer a logical tax regime with a single point of taxation if they are to rise to globally comparable stature." 

He said that the multitude of taxes in Indian REITs has made it less attractive. Giving an example Rakesh Yadav of Antriksh India said, "When a REIT sells shares of assets, the capital gain on it is taxable. In other countries stamp duty is exempted but not in Indian REITS."