Reit and InvIT are similar to mutual fund schemes

I had read about Reit & InvITs in DNA Money. I want know more about such type of investments and how beneficial they are for individual investors.
- Sunil Mahadik

Real Estate Investment Trusts (Reits) and Infrastructure Investment Trusts (InvIT) are new instruments that have yet to commence in India, but they are expected in this financial year.

Let me give you a rather simplistic way of describing Reits. Reits are like mutual fund scheme which will invest in rent-bearing property (primarily commercial property) with 20% being allowed to be invested in under-construction property. The objective of the scheme will be to generate regular income flows and distribute it among the unitholders. The scheme is compulsarily required to distribute 90% of the income received by it to the unitholders at least once in every six months. The tax treatment of the amounts distributed will be the same as it is received by the scheme. For example, to the extent the distributed amount consists of rent received, it will be treated as rent in the hands of the unitholders, to the extent it consists of interest it will be treated as interest, and to the extent it consists of dividend received by the scheme it will be treated as dividend in the hands of the unitholders. Most Reits are likely to be listed. Capital gains, if any, on sale of Reit units on the stock exchange will be free from capital gains if the holding period requirement is met and securities transaction tax is paid. There is a minimum subscription amount around Rs 2 lakh.

Broadly speaking, InvIT is a similar scheme that will invest in completed infrastructure projects with broadly-similar structure.

Both instruments are currently untested. As far as individual investors go, Reits should offer a good option to invest in commercial real estate by diversifying the investments over many properties as well as restricting ticket sizes as compared to a direct investment in commercial property by the investor. This can provide reasonable regular returns plus capital appreciation over the long term in a tax- efficient manner. Some more tax clarifications are awaited and liquidity remains to be seen. InvIT, in its current form may not really appeal to individual investors but again, let us see how it develops.

This is an overtly simplified explanation for both the products. Please seek professional advice before making any investments in either of the two products.

Need your views on the below-mentioned phrase used in the Finance Act, 2017 with regard to Sec 269 ST & 271 DA - What is meant by one person? What is meant by one single day? What is meant by one transaction or occasion from a person? What are its effects with the transaction relating to tenant property while disposing off (selling by one tenant to another tenant), when the ownership of the property lies with land lord.
- Azim

It is not clear what the complete context of your questions are. But I think you are hinting that you will accept cash in excess of Rs 2 lakh for transferring tenancy rights to another tenant without the permission of the landlord. Whatever may be the impact on your position as a tenant under the particular states rent control Act as far as the Income tax provisions are concerned, my view is as follows:

These tax provisions have been introduced to reduce the usage of transactions in everyday transactions beyond Rs 2 lakh. I suggest that you do not try any creative or aggressive interpretation of the section. When in doubt assume that the transaction is not allowed. Use common sense conservative interpretation and do your business accordingly. Do not accept cash beyond Rs 2 lakh for transfer of tenancy rights (whether over one day or several days). Declare for tax purposes whatever cash (less than Rs 2 lakh) that you do receive U+0065. Consult a legal advisor before taking any further steps in the matter, lest you loose your valuable tenancy right as well as get into income tax trouble.

I was going through your article on PMAY and some others related to it, and I have a query regarding the same. The article clearly mentions that in order to get benefits of PMAY, one must have women as the coowner, and as I am unmarried, I will not be able to get its benefits. But my query is - if I included my wife as the co-owner of the home after marriage, can I apply for the scheme? Also, what is the timeline to apply for PMAY since buying home.
- Abhishek Deshmukh

Dear Abhishek – there is some good news for you if your annual income is between 6 lakh and 18 lakh. In that case, you will fall within the PMAY middle- income group (MIG) scheme. The details of this scheme were announced after the publication of the article referred to by you. In the MIG scheme, you need not have to wait till you get married to avail the PMAY subsidy of around Rs 2.30 lakh, and it will also not matter if your parents already own a house in India. As long as you yourself do not own a house anywhere in India and the house being bought by you has a carpet area of less then 970 sq ft, or 1200 sq ft, you will be eligible for the PMAY subsidy. Even resale houses are eligible for this benefit and you can also look at self construction. The PMAY subsidy will be applied for on your behalf by your home-loan lender, so make sure the lender is registered with PMAY before finalising the lender. As soon as the subsidy is disbursed by the government to the lender, it is credited to your account and the benefit is passed on to you in terms of reduced EMI. As per anecdotal evidence in the PMAY for economically weaker sections and lower income group which is a more stringent scheme, the disbursement takes a few months after the loan is disbursed.

Harsh Roongta is a CA and Sebi-registered investment advisor. Send your queries to personalfinance@dnaindia.net or tweet them to @AskHarshdna