Hon’ble Finance Minister Shri Arun Jaitley introduced the concept of Business Trust by Finance Act, 2014. In India, Business Trust would operate as Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). Real Estate Investment Trusts (REITS) have been successfully used as instruments for pooling of  investment in several countries. REITs were created in the United States in 1960. Since then, many countries around the world have established REIT regimes.

Business Trust

Section 2(13A) of Income Tax Act defines Business Trust as below:

2(13A) “Business Trust” means a trust registered as an Infrastructure Investment Trust or a Real Estate Investment Trust, the units of which are required to be listed on a recognized stock exchange, in accordance with  the regulations made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) and notified by the Central Government in this behalf;

Following clause (13A) shall be substituted for the existing clause (13A) of section 2 by the Finance Act, 2015, w.e.f. 1-4-2016:

(13A) “business trust” means a trust registered as,—

 (i)  an Infrastructure Investment Trust under the Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992); or

 (ii)  a Real Estate Investment Trust under the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992), and

The units of which are required to be listed on recognized stock exchange in accordance with the aforesaid regulations.


Business Trust= Real Estate Investment Trusts (REITs) + Infrastructure Investment Trusts (InvITs).

These trusts are like mutual funds that raise resources from many investors to be directly invested in realty or infrastructure projects. The income-investment model of REITs and InvITs (referred to as business trusts) has the following distinctive elements:

  • the trust would raise capital by way of issue of units (to be listed on a recognized stock exchange) and can also raise debts directly both from resident as well as non-resident investors;
  • The income bearing assets would be held by the trust by acquiring controlling or other specific interest in an Indian company (SPV) from the sponsor.

The Securities and Exchange Board of India (SEBI) has notified regulations relating to two new categories of investment vehicles namely, the Real Estate Investment Trust (REIT) & Infrastructure Investment Trust (InvIT) on 26th September, 2014. These are SEBI (Real Estate Investment Trusts) Regulations, 2014 and SEBI (Infrastructure Investment Trusts) Regulations, 2014.

Real Estate Investment Trusts (REITs)

Real Estate Investment Trust (REIT) is a trust that owns and manages income generating developed properties and offers its unit to public investors. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers, hotels and even timberlands.

Globally, REITs invest primarily in completed, revenue generating real estate assets and distribute major part of the earning among their investors. Typically, most of such investments are in completed properties which provide regular income to the investors from the rentals received from such properties.

  • REITs are principally expected to invest in completed assets. Income would consist of rental income, interest income or capital gains arising from sale of real assets / shares of SPV.
  • REITs are managed by professional managers which usually have diverse skill bases in property development, redevelopment, acquisitions, leasing and management etc.
  • Listed REITs provide liquidity, thus providing easy exit to the investors.

Structure of REITs :

Structure of REITsInfrastructure Investment Trusts(InvITs)

Infrastructure Investment Trusts make direct investment in infrastructure facilities which are yielding income e.g. Toll Road, Railways, Inland waterways, Airport, Urban public transport. InvITs will allow infrastructure developers to monetize specific assets, helping them use proceeds for completing projects of theirs stalled for want of funds.

Structure of InvITs is quite similar to REITs. The main difference is InvITs make investment into infrastructure facilities whereas REITs make investment in commercial real estate properties.

The country’s largest real estate player, DLF and private equity players such as Blackstone have been planning to launch REITs. MAT was one of the biggest hurdles in the way of REITs, now the discussions have again started after the government has relaxed norms on minimum alternate tax. Finance Minister had addressed the issues to simplify REITs taxation regime. In his budget speech of Union Budget 2015-16, Finance Minister has mentioned that these collective investment vehicles (namely REITs and InvITs) have an important role to revive construction activity. A large quantum of funds is locked up in various completed projects which need to be released to facilitate new infrastructure projects to take off.

It will be interesting to see in future how India’s real estate sector will be affected by these investment vehicles.

(Submitted by – Tarun Kumar (B.Com, CA-Final) Mobile: +91-888-282-8112 Email-ID: tktarun786@gmail.com)

Author Bio

Qualification: CA in Practice
Company: N/A
Location: DELHI, New Delhi, IN
Member Since: 25 Apr 2017 | Total Posts: 41
A passionate Chartered Accountant having practical work exposure in the area of Direct Tax. An organised and efficient person by nature who loves to take challenges of working with dynamic and fast paced environment with the help of knowledge and work experience. View Full Profile

My Published Posts

More Under Income Tax


  1. satyam says:

    bro… u made me to understnd tax easily… i think u r admin of this pwebsite..great knowledge and great work… plz write on gst

Leave a Comment

Your email address will not be published. Required fields are marked *