Finance Minister Nirmala Sitharaman’s tax relief to Sovereign Wealth Funds investing in infrastructure will give a huge funding boost to affordable housing in the country.
Finance Minister Nirmala Sitharaman’s tax relief to Sovereign Wealth Funds investing in infrastructure will give a huge funding boost to affordable housing in the country, potentially aiding Prime Minister Narendra Modi’s ‘Housing for All’ scheme too. Earlier this month, Nirmala Sitharaman announced that the sovereign wealth funds investing in infrastructure in India will not attract any tax on interest, dividend and capital gains income. Sovereign wealth funds in India have a combined $29 billion (about Rs 20 lakh crore) worth of Assets Under Custody (AUC) as of December 2019. This will open up massive funds for India’s logistics and real estate sectors, property consultancy firm JLL India said in a research report.
“India seems to have gained a major impetus following some positive policy backing and the ecosystem in general thus helping boost the image of the country as a favorite with SWFs,” JLL India said. The budget announcements are in line with Narendra Modi’s ambitious goal of ‘Housing for All by 2022′.
What are Sovereign Wealth Funds?
Sovereign wealth funds are state established and owned investment funds which are set up with revenues generated from trade surpluses, central bank reserves, currency operations, privatisations and transfer payments. Asia is leading sovereign wealth fund shareholder with the continent witnessing 10% CAGR in global Assets Under Management (AUM) of SWFs during 2008-2018, JLL said.
Sovereign wealth funds play a crucial role in investment across the globe. India has also witnessed a spike in investments by sovereign wealth funds on the back of various policy measures introduced to attract foreign investments. “The Union Budget for 2020 has further incentivized SWFs to invest in infrastructure including affordable housing and warehousing by providing tax exemptions. SWFs would be more inclined to use the direct investment route as compared to investment platforms,” Ramesh Nair, CEO and Country Head, JLL India, said.
With its latest budget, the government has incentivised sovereign wealth funds when investments are made in infrastructure and other notified sectors before 31 March, 2024 and with a minimum lock-in period of three years. Other than this, the government has further provided a one-year tax holiday extension to real estate developers to attract investments in the crumbling sector.