DLF Ltd. (DLFU), India’s largest real estate developer led gains among property stocks after Finance Minister Arun Jaitley proposed revamping tax rules to enable the introduction of real estate investment trusts.
DLF surged 12 percent to 227.45 rupees at 2:45 p.m. in Mumbai, its biggest gain in five years. Oberoi Realty Ltd. (OBER), the country’s second-largest developer by value, jumped 6 percent while Prestige Estates Projects Ltd., a Bengaluru-based developer added 7 percent. The S&P BSE India Realty Index rose 9 percent, set for its biggest gain since 2009.
Jaitley’s proposal to amend rules to end double taxation for REITs will boost transparency in the real estate sector and help developers raise funds, said Neeraj Bansal, Partner and head real estate and construction at KPMG LLP said.
“We finally got a specific statement on REITs which have been under discussion for a while,” said Sanjay Ubale, managing director, Tata Realty & Infrastructure Ltd. “Whether it spurs actual development or not, will depend on how quickly regulatory clearances come through. But now we can at least see the pieces falling in place.”
The government also plans to introduce a REIT-type structure for infrastructure projects which will help reduce pressure on the banking system and such instruments will attract long-term finance from foreign and domestic investors, Jaitley said.
Among the listed developers that have rent yielding properties and are likely to introduce REITs are DLF, Prestige Estates (PEPL), Brigade Enterprises Ltd., Phoenix Mills (PHNX) Lt. and Oberoi Realty, Kotak Securities said in a note to clients today.
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