From tax standpoint, Budget has resolved all REIT issues: DLF

The government's decision to exempt real estate investment trusts (REITs) from dividend distribution tax (DDT) has eliminated the one major stumbling block that was standing in the way for the securities, says DLF CFO Ashok Tyagi.In an interview with CNBC-TV18, Tyagi said REITs should now take off in a big way and said he expects some listings to happen in the next few months.REITs allow commercial real estate developers to turn their rent-yielding assets into securities that investors can buy into. REITs, which are listed on exchanges, thus help in securitization, better asset utilization and management of balance sheets.DLF, one of the country's biggest commercial real estate players, however has put some of its REIT listing plans on hold after it announced an alternate corporate plan that involved selling stakes in the company to private equity players last year, Tyagi said.Below is the verbatim transcript of Ashok Tyagi's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Sonia: There are many other procedural hurdles which is outside the ambit of the Budget which needs to be sorted as well but purely on dividend distribution tax (DDT) exemption, how much of a positive is it and how quickly do you think the Real Estate Investment Trust (REIT) process can begin?A: There were three basic tax hurdles to the REIT thing; the capital gains, the minimum alternate tax (MAT) deferral and the DDT. The first two were sorted out in the last Budget. DDT was a residual piece. I think with this sorting out, in all fairness from a taxation standpoint they have evolved the perfect model. However, now from developer's standpoint, who contribute to the asset as well as from the foreign investors' standpoint who earns the dividend yield. I think the product is now perfectly designed. How long does it take for the first set of REITs to hit the market, I think it will be few months for people to do their homework for all the regulation framework from Sebi and all, most of it is in place in all fairness, so a big move from REIT's standpoint. Latha: Should we expect it the first quarter of FY16, should we expect it by June, should we expect it by September and what will it do to your finances. Should one see interest outgoes fall because you have better securitisation?A: From DLF standpoint since we have already made out our strategy and announced in public that step one is to have 40 percent of the promoter stake in the rental company first being picked up by institutional investor. So immediately for us the REIT at least in the main body of DLF's Cybercity will not be impacting right now but once Cybercity becomes like 60:40 entity; 60 percent owned by us and 40 percent by foreign institutional investor, REIT is potentially a model to evolve to and hopefully move into future. This waves the regulatory pieces of it completely. However, from sectoral standpoint there are other players who are not following this method of private equity that we are following. This could have an accelerating impact on listing. Benefit wise you are right, the cost of financing and the entire load of banks financing on this commercial asset sector. I think that should reduce significantly.Sonia: Could you give us a proper timeline because last time you had indicated that in FY16 you could be launching your first REITs. Now FY16 has come to an end. When can we expect the first launch from DLF?A: We announced an alternate roadmap in October, which means we will get private equity player or a set of private equity institutions in our rental business and do a 40 percent stake sale for them. So that is a roadmap that we are continuing to pursue for now. Therefore, we are not going to get REIT in immediate future because that is a roadmap that we have announced and that's a roadmap that we will pursue but from a next step standpoint the REIT will come but I do not foresee it coming for us in the immediate few quarters because we have a roadmap which we have already announced.