How are the REITs IPOs likely to be impacted by the proposed dividend tax in the Union Budget?

The first signs of an impact are already visible as the IPO of Mindspace Business Park REIT which was slated to hit the market in March may now be put off after the proposed tax on dividends at the receiver’s end. The REIT IPO was supposed to raise Rs.1,000 crore by selling new shares, while the current shareholders K. Raheja and Blackstone were to offload some of their shareholding. It may be recollected that in the 2020 budget Nirmala Sitharaman removed dividend distribution tax (DDT) at the company level and instead transferred the onus of tax to the individual investor. Now individuals will have to pay tax on all dividends making REITS unattractive from a taxation perspective. As of now the IPO has not been shelved but has been put off from March to the next fiscal year. In fact, global funds and investors argued that the dividend tax proposal rendered REITs less lucrative as an investment. This was supposed to be only the second REIT IPO listing with the first having listed in April last year in the form of Embassy Office Parks REIT. While random investor meetings are happening to gauge the appetite, there are no active road shows happening for the IPO. There are already calls for roll back of the dividend tax on REITS and INVITs considering that they are still in their infancy.