SEZ, The REIT Investment Strategy
Mutualfund-likeinvestmentinstrumentsareREITs.Theacquisitionofrealestate propertiesisaREIT'smainobjective.Itmightbedonebyrentingthemout &managingthemaspartofaportfolioofinvestmentstoassureasteadyyield.The risingIndianeconomydependsontherealestateindustry.Itaffectstheoverall economyinamultipliermanner.Realestateassetsareheld,managed,andinvested inthroughtheusageofarealestateinvestmenttrust(REIT).
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Thesemightincludehousesthatarefinishedorunderconstructionandareusedto makemoney.Thesearecommercialproperties,suchasoffices,malls,and warehouses.Hotels,hospitals,andconferencecentresareallconsideredtobepart ofcompositerealestatedevelopmentsunderthelegislationiftheyproduceincome orrent.Additionally,includedareindustrialparks&specialeconomiczones(SEZ). SEZhasgrowninimportanceasavehicleforREITinvestment.
TheacquisitionofrealestatepropertiesisaREIT'smainobjective.Asopposedtoa listedrealestatebusiness,whichisestablishedtodeveloprealestateproperties& resellthem,itcanbebyleasingthemout&managingthemtoassureasteadyyield aspartofaninvestmentportfolio.Therealestateassetsareoftenheldby developersinSpecialPurposeVehicles(SPVs).Thepoolingofseveralsuchassets underasingleSEBI-regulatedtrustismadepossiblebyaREITinvestment.
Investment in REITs in India
Acarefullythought-outinfrastructuredesignaidsinluringrecurrentforeign investmentandexpandingthecapitalbaserequiredforeacheconomy'ssustainable growth.Thedevelopmentofthebusinessenvironmentandthegrowthofthereal estateindustrybothincreasedemandforhotelandofficespace.Thesectorneeds newfundingsourcesfrequentlybecauseofashortageofpublicfunding.REITs,or realestateinvestmenttrusts,comeintoplayatthistime.
In2007,SEBIintroducedREITinvestingforthefirsttimetotheIndianmarket.As interestintheinvestmentvehicleincreased,manyregulationswereannounced. Theseweredesignedtoaidintheeffectivemanagementoftheseinvestmentfunds. Currently,REITbusinessesregisteredonIndianstockexchangesaregovernedby theSEBI.
SEZ: What is it?
InIndia,specialeconomiczones(SEZs)areplaceswhereregionalfirmscanbenefit fromincentives.SEZsusuallyofferbusiness-friendlyregulations,competitive infrastructure,duty-freeexports,andtaxadvantages.Dueofthis,manyglobal corporationsselectIndia'sSEZsasapreferredinvestmentlocation.Particular interestinSEZshasbeendemonstratedbyexporters.Toencourageexportcentres andboostdomesticmanufacturing,theSEZActasitisnowwrittenwaspassedin 2006.Theminimalalternatetaxwasappliedlater,though.Alsointroducedwasthe sunsetclause,whichwouldeliminatetaxincentives.Afterthat,theseareasstarted todeteriorate.
ToreplacetheSEZAct2005,theIndiangovernmentproposedtheDevelopmentof Enterprise&ServiceHubs(DESH)Bill.TheDESH'smissionisto"enablethe establishment,growth,andupkeepofDevelopmentHubs."Thesemayinclude already-existingSpecialEconomicZones,whichserveascommunitiesforfostering economicactivity,jobgrowth,integrationwithglobalsupplyandvaluechains, maintenanceofproductionandexportgoals,advancementofinfrastructure facilities,&promotionofR&Dspending.
Thereturntoworkfollowingtheepidemichasbeenslowerthananticipated,despite theenormouspent-upleasingdemand.Short-termeffectsofreduceddemandare probablygoingtobefelt.TheDESH(newSEZlaw)advancementisstillcrucialfor boostingoccupancybecauseofthesubstantialexposureofSEZsintheREIT investmentportfolio.
SEZ categories in India
Freeports,bondedlogisticsparks,exportprocessingzones,urbanbusinesszones, industrialparksorestates,andfreetradezonesareexamplesofSEZs.Followingisa listofthemanySEZtypes:
Sector-Specific SEZ - Committedtomanufacturingoneormoreproductsina certainsector.Forinstance,electronicgoods(using10hectaresormoreofland)or oneormoreservices(usingmorethan100hectaresofland).
Multi-product SEZ - Producesavarietyofproductsorprovidesservicestooneor moresectors.(Landused:atleast1000hectares).
SEZ in a port or airport; or for free trade and warehousing – SEZinaportor airport,orforfreetrade&warehousing(uses40ormorehectaresoflandarea)Producinggoodsintwoormoreindustriesinvolvestradingandwarehousing.
Advantages of SEZ
SEZsareestablishedtoaidinthespeedyeconomicgrowthofthecountry.The followingaresomeadvantagesofSEZsinIndia:
Constructionofinfrastructureandcreationofjobpossibilities.
Taxadvantagesforregionalenterprisesandorganisations
Infrastructureimprovements.
Itpromotesthegrowthofforeignexchangerevenuesbygenerating additionaljobsthroughexports.
BusinessesinSEZsareentitledtobenefitsincludingfreeenergy,water,a discountonlandprices,etc.
Theseeconomiczonesareknownasduty-freeindustrialparksintermsof tradetransactions,duties,andtariffs.
Inotherwords,goodsandservicesprovidedtoSEZsareconsideredexports andexemptfromtheGoods&ServicesTax(GST).
SEZ Tax Advantages
ThefollowingarethemaintaxadvantagesopentoSEZdevelopers:
CreatingSEZsforauthorisedoperationsthathavereceivedBOAapprovalare exemptfromcustomsandexcisetaxes.
IncomefromthebusinessofconstructingtheSEZisexcludedfromincome taxfor10yearsbeginningin15years,asperSection80-IABoftheIncome TaxAct.(AsofApril1,2017,developersaresubjecttothesunsetprovision.)
TheCentralSalesTax(CST)isexcluded.
(SecondScheduleandSections7and26oftheSEZAct)Exclusionfrom ServiceTax.
SuppliestoSEZarezero-ratedunderthe2017IGSTAct.
Rising Housing Demand as a Result of SEZ Development
InIndia,thereare5,634SEZunitsthathavebeensanctionedasofSeptember30, 2022.InSEZsaroundIndia,morethantwomillionpeopleareemployed.Anotable indicatorofthemultipliereffectofjobdevelopmentonhousingdemand,retail consumption,&theeconomyistheriseofcitieslikeNCR,Bengaluru,Chennai, Hyderabad,&Pune.SEZsbasedonmanufacturinghavealsobeenextremely importantincreatingdemandforcheaphousing.
SEZ the REIT way to invest conclusion
SEZsareestablishedtoaidinthespeedyeconomicgrowthofthecountry.Fostering domestic&internationalinvestmentandencouragingexportsofgoodsandservices arethekeyobjectives.SomeofthekeybenefitsofinvestinginSEZsinIndiainclude taxincentivesforlocalbusinessesoperatingthereandinfrastructuredevelopment. PeopleinIndiacaninvestinpriceyrealestate,suchasSEZs,&enhancetheircapital bygettingdividendincomethankstoREITinvestments.
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