Budget 2015: A largely positive event for real estate sector, says IDFC

Following are the impact analysis of the Budget proposals for the real estate sector, according to IDFC:Measure: Sponsor of REIT would be exempt from capital gain tax and only liable to STT at time of transfer of assets to SPVImpact: Positive. Resolves one major issue related to transfer of sponser assets to SPV. However, this structure continues to be handicapped by the dual tax incidence of corporate tax and DDT payable at SPV level which depresses yields for investors  Measure: Pass through benefit to rental income arising directly to REITImpact: Positive. REITs can directly own assets and income distributed to the unit holders from such assets would be taxable in the hands of the unit holders and not at business trust level. Earlier this pass-through benefit was available only to assets residing with the SPVs. However we believe developers may be reluctant to sell assets directly to REIT due to potential tax leakages related to stamp duty and capital tax payoutsMeasure: Increase in Service Tax rate from 12.36% to 14%. Impact: Negative. Will increase cost of construction and commercial rentals