The Indian government has taken a significant step towards fostering growth in the real estate and infrastructure sectors by amending tax regulations for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). Previously, investors were required to hold REIT and InvIT units for a period of 36 months to qualify for the long-term capital gains (LTCG) tax benefit. This relatively long holding period often deterred potential investors.
In a bid to align the tax treatment of REITs and InvITs with that of listed equity shares, the government has reduced the holding period for LTCG to 12 months. This move is expected to have a profound impact on the investment landscape. By reducing the lock-in period, REITs and InvITs become more attractive to a wider investor base, including retail and institutional investors.
This policy change is anticipated to enhance the liquidity of these instruments, making them more accessible and tradable. Consequently, it could lead to increased participation in the secondary market, thereby deepening the overall market for REITs and InvITs. Furthermore, the alignment of tax treatment with listed equity is expected to boost investor confidence, as it removes a key disparity between these asset classes.
Overall, the government’s decision is a positive step towards creating a more conducive environment for REITs and InvITs, which are crucial for channelizing investments into the real estate and infrastructure sectors. It is expected to unlock significant investment potential and contribute to the growth of the Indian economy.
