Sebi seeks clarity on tax benefits for REITs, infra bonds

“Sebi will soon finalise norms for REITs, but is awaiting clarity on taxation issues,” the Securities and Exchange Board of India (Sebi) Chairman UK Sinha said at Skoch Summit in Delhi on Saturday, adding that the regulator wants such trusts to get tax pass-through status. Sebi on Thursday had announced a slew of reforms related to IPO and Offer-for-Sale in order to boost primary markets. Besides keeping minimum dilution to public in IPO at 25 percent or Rs 400 crore, the market watchdog has also approved sharing Know Your Customer (KYC) information with other financial regulators. To usher in more transparency, it has even revised certain guidelines for alternative investment funds, including stricter disclosure requirements. The market watchdog is also close to framing new rules for Infrastructure Investment Trusts but Sinha said that there needs to be clarity on withholding taxation issues for such products. These new products would allow investors to invest in specific products linked to real estate projects and infrastructure projects, while providing necessary safeguards. Besides, they would also help corporates raise significant amounts of capital for their projects. On the need to expand corporate bond markets, Sinha said that necessary infrastructure for this was already in place and the related regulations have been simplified. “I believe an emerging market like India must focus on development of the market. The Sebi Act mandate is to work for growth of the market,” he said. The Sebi chief further said that there was a need to work on increasing the base of corporate bonds. Focusing on the small and medium enterprises (SMEs), he said the government and Sebi have been trying to help the sector to raise capital from the market. He said the latest experiment which was taken in 2012 to help the sector has been a success with around 65 companies getting listed on the SME platform of both BSE and NSE. “The amount raised by these companies was around Rs 600 crore. So if you go by this minimum 25 percent public shareholding, the market capital of all these companies at the time of listing was around Rs 2400 crore. Today, their combined market cap is over Rs 7,500 crore. Thus, you can imagine in what way this experiment has succeeded in getting the potential and value realization of these companies,” Sinha said. He hopes more companies take the path. Sebi has been encouraging institutional trading platforms as well for companies with venture or private equity funding to realize their price discovery. Currently six companies are using that trading platform. About the new regulations, Sinha said that Sebi would soon put in place norms for crowdfunding, which would allow start-ups to tap new platforms to raise funds. Besides, there are already norms in place for Alternative Investment Funds (AIFs), such as venture capital and angel investors.