Real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) are innovative vehicles that allow developers to monetise revenue-generating real estate and infrastructure assets while enabling investors or unitholders to invest in these assets without actually owning them.
Such monetisation benefits developers by allowing them to release capital for funding new infrastructure/real estate projects, and provides liquidity to investors or unitholders as the units of the trust are listed on exchanges.
Apart from these, REITs and InvITs enjoy favourable tax treatment, including exemption from dividend distribution tax and relaxation of capital gains tax.
Both REITs and InvITs are regulated by the SEBI.
The government has also permitted banks and mutual funds to invest in these instruments, subject to specific predefined elements.
Recently, the Cabinet Committee on Economic Affairs approved the monetisation of assets of POWERGRID, a Public Sector Undertaking (PSU) under the Ministry of Power, through Infrastructure Investment Trust (InvIT) model.
This is the first time any PSU in Power Sector (Powergrid) will undertake asset recycling by monetising its assets through the InvITs model and using the proceeds to fund the new and under-construction capital projects.