By K P C Rao, LLB,
FCMA, FCS.,
CMA (USA)., FIPA
(Australia)
Practicing
Company Secretary
kpcrao.india@gmail.com
The Narendra Modi government had announced plans for such
trusts in the July 10, 2014 Budget presented by finance minister Arun Jaitley. The
trusts will allow companies engaged in infrastructure and real estate to raise
longterm resources at competitive rates. The trust structure is aimed at
creating a framework of fast-track, investment-friendly and predictable public
private partnerships (PPPs) to build large-scale projects that are of vital
importance for India.
The proposed move will help in unlocking funds from
completed projects in infrastructure and real estate. The promoters of such
projects, particularly the completed ones, would be able to sell their stake to
the trust, which, in turn, can raise long-term, tax-free funds from unit
holders. The trusts will raise funds
through the sale of units. This will be used to buy equity stakes in completed
projects. Part of this can be invested as debt as well.
The Securities and Exchange Board of India (SEBI) notified
regulations for Real Estate Investment Trusts (REITs) and Infrastructure
Investment Trusts (InvITs) on September 26, 2014. Through these regulations,
SEBI has specified the structure and size of these trusts, the responsibilities
of the various parties involved, investment conditions and dividend policies.
To raise long-term capital, the new guidelines will
incentivise the creation of such trusts so that investors have a lower tax
burden, apart from avoiding multiple taxation
at different levels.
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