I would like to learn more about the current tax implications associated with REITS.
We You need to be able to see how REITs distribute their income. FirstYou can do this by paying interest, then you will get a dividend, and finally you will repay your debt. The The repayment of any debts prior to this was not taxable, but this year. BudgetOur finance minister has stated that the taxable income will fall from the next financial year. So From now on, there may be a decline in the yield, as overall, between 37-47% and 47% of their distribution were through repayment of loans.
If Anyone will take a greater hit than others, but it is going be our ultra HNI clients and HNIs who used to use this opportunity to obtain maximum yield through REITs investments. However, this option is no longer available so their total post-tax yield will be approximately 1%. But Retail investors also have a great opportunity with this deal. Why? Because These REITs can be purchased at a discount of between 10% and 29% from their NAVs, as we have observed. So Retail investors are now able to invest in these REITs. In For those under 30%, the tax will be taxable in the following financial year.
So Let’s take a closer look at this. You They are telling me it is more appealing for investors.Like For example, what benefits will I get from this change if I take units in a REIT right now? Could This is just an example.
As of now, retail investors can invest in the three listed REITs – Embassy, Mindspace And Brookfield REIT. All These are between 250 and 350 units. One You can invest in these REITs, and the income will be distributed via dividend interest or repayment of debt. As You can go as far as the Embassy REITs are concerned. They have so far shared approximately 6-7% of the income distribution in the current fiscal year. Out 2.5% of this amount is used to repay debt.
SoYou, as a unit holder will not have to pay taxes on the repayment of the debt because you are the retail investor. But HNIs with incomes below the 30% tax bracket would have a lower yield because their total income exceeds the overall taxable slabs. So There should be no concern if you are a retail investor.
So So far, there are only three REITs available on the market. Do You should think about the Budget Announcements: The industry would launch more REITs Will Announcements like these discourage or dampen industry sentiments?
Not Just because India We still have a lot of work to do. Our Economy is strong and infrastructure space is available. REITs are Real Estate Investment Trusts These are the areas where large institutions are generally allowed in, and we will continue to have more of these listings in the future because they are linked to both our infrastructure development and our economic growth around the world.
So We would see more REITs listing these types of amendments and changes. As Although only three of them are currently listed, they offer a very good rate of return. Since They have listed their shares and offered returns of 9-16% up to now. We may see some upside from this point. We We are also waiting for positive news.
We Are waiting for the DESH Bill to be introduced and approved in our parliament. In this way, we expect that the occupancy level of all these REITs will see good growth over time and that we could see some upside in these listed REITs.So So why are investors so hesitant to invest in REITs?
As The interest is not there at the moment because people who enter the market to earn more than 15% wouldn’t get in. Why? Because The current rate of return for the moment is between 9-14% Once We get this Development Of Enterprise And Service Hubs (DESH) Bill Passed in ParliamentWe may also see good occupancy. This It was particularly hampered by Covid Their income is dependent on their occupancy level. So These REITs are unlikely to see any significant movement until their occupancy level increases in the next months.
Over It will take a while, maybe in the next two or three quarters. We are expecting occupancy levels to rise and have set good targets. For Example: Embassy REITs are currently trading at Rs 321, we have set a target Rs A 410 is a good option with a 30% upside
Then MindSpace and BrookfieldWe have established targets for 20%. It is something I recommend to our retail investors. HNI investors also have the option of getting in on it, though they will be receiving a lower post-tax yield.
Can What is a REIT? Can it be used to invest in retirement?
It would not yield regular returns. However, up to now, the distribution of income has been 6-9% per year. Those These instruments can be used to help with retirement planning. People who are interested in investing in them for their retirement planning should park between 10 and 15% of their corpus. But, if they are expecting regular income from the REITs, it is not advised.