Budget 2023: Impact on InvITs

Budget 2023: Impact on InvITs

Enough has been written about the impact of Budget 2023 on REITs and InvITs. Through this piece, we aim to succinctly capture the what, why and what next of the proposed changes – keeping it germane mainly to global financial investors.

Key Takeaways:
  • “Distributions out of repayment of debt principal could now be taxed as ‘other income’ – at odds with global standards
  • Distributions out of debt repayments through redemption of units not treated as ‘income’, but reduce cost of acquisition – InvIT / REIT Regulations do not permit redemption of units
  • Major impact on IRRs as distribution structure of most InvITs factored in distributions through debt repayments
  • Changes and policy ambiguity could thwart the growth of REITs / InvITs, which were just about seen as ‘bond proxies’

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