Why are the Real Estate Investment Trusts (REITs) worried about the tax aspects after the Union Budget 2020?

While the Budget 2020 did not directly address the issue of REITs, the dividend tax shift did have an impact on REITs too. In fact, when the Budget 2020 shifted the onus of taxation from DDT to the investors, one of the big worries was for the REITs. As per the new rules, investors in REITs and INVITs will also have to pay tax on dividends at their peak rates, making it a virtual non-starter. More so, when both these products are just about taking off in the Indian context. REITs are the realty equivalent of mutual funds that invest in a portfolio of realty assets and pass on benefits to the investors. Currently, Indian REITs can only invest in commercial properties and not in residential properties. However, it did offer a good source of diversifying investment risk since it was a portfolio of diverse properties and also it did not move in tandem with equities and bonds. This diversity of the asset class made the REITs unique from an investment standpoint.