Context:
The Securities and Exchange Board of India (SEBI) has issued regulations to establish guidelines for creation of Small and Medium Real Estate Investment Trusts (SM REITs).
Small and Medium REIT (SMREIT):
- SMREIT – A type of real estate investment trust that can have an asset value of at least Rs 50 crore, compared to the existing minimum of Rs 500 crore for regular REITs.
- Fund pooling – It may gather funds starting from ₹50 crore by issuing units to a minimum of 200 investors.
- Fund utilization – Used for acquiring and managing real estate assets, generating income for the investors.
- Ownership of assets – Each scheme will have its own special purpose vehicles (SPVs).
- Investment Manager –Investment Manager responsible for setting up an SM REIT is required to:
- Have a net worth of at least ₹20 crore
- Have a separate trustee for oversight.
- Maintain a website detailing all SM REIT schemes enhancing transparency and investor access to information.
- Significance –
- Smaller and more diverse real estate projects can be listed as SM REITs, opening up more opportunities for investors.
- Also have the flexibility to create separate schemes for owning different types of real estate, such as residential, commercial, industrial, or mixed-use.
Infrastructure Investment Trust (InvIT):
- InVIT – Collective Investment Scheme similar to a mutual fund, which enables direct investment of money from individual and institutional investors in infrastructure projects
- Registered with – SEBI
- 4 parties involved under the scheme – Trustee, Sponsor(s) and Investment Manager and Project Manager.
- Trustee has the responsibility of inspecting the performance of an InvIT
- Sponsor(s) are promoters of the company that set up the InvIT.
Source: Hindustan Times
Previous Year Question
Consider the following statements:
Statement-I : Interest income from the deposits in Infrastructure Investment Trusts (InvITs) distributed to their investors are exempted from tax, but the dividend is taxable.
Statement-II : InvITs are recognized as borrowers under the ‘Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002’.
Which one of the following is correct in respect of the above statements?
[UPSC Civil Service Exam – 2023 Prelims]
(a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I
(b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I
(c) Statement-I is correct but Statement-II is incorrect
(d) Statement-I is incorrect but Statement-II is correct
Answer: (d)
Explanation:
Statement 1 is incorrect. REITs and InvITs make distributions to their unitholders in the form of interest, dividend income, and rental income all of which are taxed in the hands of unit holders.
