New REIT, InvIT regime spells higher taxation for sovereign funds

Other foreign investors likely to face significantly higher taxation on cashflow distribution too

Tax changes in the budget may result in a higher tax outgo for sovereign wealth funds, pension funds and other foreign investors who put money into real estate and infrastructure projects.

Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) are both investment vehicles like mutual funds. The difference is in the underlying asset--while REITs hold property, InvITs hold an infrastructure asset such as a highway. Sebi's regulations require 90 per cent of cashflows in both to be distributed to investors. If they have lent to a company as part of their operations, repayment amounts are subject to similar