Budget proposals that could change the fortunes of real estate companies

The real estate industry was hoping for sops in the Budget. However, those hopes did not fructify with few references to the industry. There are only two changes that directly affected the real estate industry. The net effect could be negative in the short run, while being healthy in the long run.

First, there are tax clarifications for Real Estate Investment Trusts (REIT), which should considerably ease the prospects for raising money and listing these instruments. REITs are popular in many places. These are structured like mutual funds, except that they are focussed purely on real estate assets.

Some REITs look for capital gains by buying, developing and selling land. Other REITs generate rental income by building and leasing out assets. The sponsors (meaning the institutions or individuals floating the scheme) of REITs split them into units, which are sold to the general public. The REIT may then be listed and traded like a mutual fund or ETF. This allows individual and households to take exposure to real estate without the need to make a large, lumpy investment.

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