The Singapore Exchange (SGX) will hold a roadshow for companies with significant commercial real estate portfolio, urging them to list these income-generating assets as REITs (real estate investment trusts) on the exchange, people familiar with the development said. SGX has appointed a marketing manager in India to facilitate the process, FE has learnt.
Confirming the development, SGX told FE that after an approval from the RBI in July 2014, the exchange has begun operations with Neena Prasad as chief representative. It added, “The office is aimed at providing information and acting as a communication channel to support capital raising by Indian companies in Singapore”.
The development assumes relevance at a time when several large private equity funds and companies are preparing to tap funds via a REIT listing. Among them are Embassy Office Parks, a joint venture company between Blackstone and Bangalore-based Embassy Developers; another joint venture between Delhi based real estate firm, RMZ and Qatar Investment Authority; the country’s largest player by market capitalisation DLF and K Raheja Corporation, a Mumbai based realty company.
While all these companies have expressed an interest to raise funds through REITs, taxation issues have been a bone of contention. A few months back, the government agreed to exempt REIT investments from the application of MAT (minimum alternative tax). However, it retained the application of dividend distribution tax or DDT, which remains a major anomaly.
A number of companies and experts have voiced concerns on the DDT tax regulation. “Compared to Hong Kong and Singapore, the DDT taxation will make Indian REITs less competitive for investors,” said Anish Singhvi, partner (tax and regulatory), PwC India.
The DDT tax is making some players rethink their REIT plans. For example, as FE reported, the Blackstone-Embassy duo may not go ahead with its REIT plan if the tax policy does not become favourable. “We are sitting on the sidelines at the moment, preparing for the launch of REITs, provided the DDT is exempted,” Jitu Virwani, chairman of the Embassy Group had said.
India’s loss can be Singapore’s gain but industry experts say, companies will still prefer to list in India. However, in case they fail to attract investors, the scale might tilt towards a Singapore listing as well. “Companies have been acquiring assets to build a profitable portfolio and raise funds. The taxation does not favour them so depending on the need for capital, some of them might consider a Singapore listing,” said Rajeev Bairathi, executive director, capital markets and north, Knight Frank India. SGX already has a few companies listed as REITs such as Ascendus, Indiabulls Properties Investment Trust and Religare Health Trust.
Meanwhile, the government’s groundwork to make REITs trade on public exchanges has propelled several commercial real estate transactions. According to a JPMorgan report, transactions close to $2 billion to $3 billion have been concluded over the past two years, wherein PE funds or sovereign wealth funds have concluded large ticket deals, buying out completed assets.