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Govt likely to ease fund-raising norms for Investment Trusts soon

According to sources, the proposals include reducing the holding period for long term capital gains, allowing banks to lend to REITs and relaxing conditions for investment in debt securities of trusts.

The government is likely to relax several norms that will make fund-raising easier for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trust (InvITs).

According to sources, the proposals include reducing the holding period for long term capital gains, allowing banks to lend to REITs and relaxing conditions for investment in debt securities of trusts.

To meet the requirement of huge funds for the infrastructure and real estate sector, the government is planning to make investment trusts more lucrative through various policy interventions, sources said.

One of the major proposals is to reduce the holding period for long term capital gains tax from 36 months to 12 months for REITs and InvITs.

Following several representations from stakeholders, the Department of Revenue is considering the proposal actively. This may require amendments to the Income Tax Act, and there is a strong possibility that it could be announced in the upcoming Union Budget, due to be presented in two months.

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Apart from reducing the holding period for long term capital gains, the government is pushing for allowing banks to lend to real estate investment trusts. Several rounds of discussion were held between the ministry of finance and RBI on this issue.

Allowing foreign portfolio investors (FPIs) to invest in debt securities of InvITs and REITs is also under consideration.

The ministry of finance and capital markets regulator SEBI have agreed to the proposals, and now the RBI to take a final call, the sources added.

A REIT comprises a portfolio of commercial real assets, while InvITs comprise a portfolio of infrastructure assets such as highways, power transmission assets. Both are relatively new investment instruments in India but they are extremely popular in global markets.
Lakshman Roy

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