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Sebi seeks tax sops for proposed real estate trusts

Regulator asks MFs to adopt districts to increase coverage.

Written by Press Trust Of India | Mumbai | Published: October 29, 2013 3:15:56 am

The capital markets regulator Securities and Exchange Board of India (Sebi) on Monday pitched for tax incentives to woo investors into the proposed real estate investment trusts (REITs),which,it is felt,will go a long way in helping the cash-strapped developers raise funds.

“For REITs to be successful,they have to be tax efficient. We will ask the tax authorities to consider some incentives for the real estate investment trusts,” Sebi chairman UK Sinha told reporters on the sidelines of a conference on protecting capital market investors here. “We will talk to the I-T department to make it happen,” he added,but did not offer details.

About five years after issuing the first draft norms,Sebi on October 10 moved a step closer and issued draft guidelines to allow REITs.

In its draft regulations, Sebi has broadly applied a framework similar to that of an initial public offers (IPOs),requiring listing of units issued by REITs. The regulator has also prescribed various norms,including those related to minimum offer size,public float,and size of assets.

REITs are proposed to be allowed to list on exchanges through IPOs and through follow-on offers and raise funds.

“REIT shall be set up as a trust under the provisions of the Indian Trusts Act of 1882,” Sebi had said,adding however,they are not allowed to launch any schemes.

As per draft rules,only such entities would be allowed that have at least 90 per cent investment in completed revenue generating projects.

The move is aimed at providing investment avenues for investors by way of trading units of REITs,similar to mutual fund and exchange traded fund structures for stocks,bonds and other securities.

The regulator said that REIT may raise funds from any investors,resident or foreign though initially,till the market develops,it is proposed that the units of REITs may be offered only to HNIs or institutions.

The draft norms comes as the real state sector witnessed rapid growth in recent years underlined by robust economic growth in the country.

Globally,framework for REIT exists in several countries including the US,Britain,Australia,Singapore,Japan and France.

In a related development,Sebi has asked mutual funds to adopt different districts to increase their penetration.

“We are now asking mutual funds to select and adopt districts. This may help increase the penetration of mutual funds,” Sebi chairman UK Sinha told a regional conference on investor protection in capital markets here.

According to a Crisil report,quoting Amfi data,the top five cities contribute 74 per cent to the pie,with the remaining 26 per cent distributed among other cities.

Debates giving nod to fund raising through convertible bonds

Mumbai: As the IPO market remains tepid,forcing companies to borrow costly funds from other sources,Sebi on Monday said it is looking at allowing them to issue convertible debentures to raise money.

“The Primary Market Advisory Committee of Sebi is currently debating an alternative route to allow corporates to issue convertibles (debentures),which after certain time must be converted into either equity or other debt instruments,” Sebi chairman UK Sinha told reporters on the sidelines of a conference. PTI

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