In conversation with CNBC-TV18, Ashok Tyagi, Group CFO, DLF, discusses the real estate sector's expectations from the government.
Hiking exemption limit on housing loan may help kick start demand.
Ashok Tyagi
CFO
DLF
Tyagi feels the government should come out with more clarity on the double taxation of REITs. "As far as Real Estate Investment Trusts (REIT) are concerned Sebi has put the basic ground rules out there but now the taxation aspect of REIT need to be addressed for them to become reality," he said.
Also Read: REITs, GST, easier FDI norms top realty's Budget wishlist
He thinks the government should address some old issues pertaining to special economic zones (SEZ) like the longstanding demand to abolish dividend distribution tax (DDT) and minimum alternate tax (MAT).
He also feels that hiking the exemption limit on housing loan may help kick start demand.
Below is the transcript of Ashok Tyagi's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Latha: Is the Budget the place to expect anything on the real estate sector, are you going with any concrete tax expectations?
A: There are three or four set of expectations that one has from the government's policy framework whether they address in their Budget or in subsequent notifications or in the following Budget, is not for me to say. As far as Real Estate Investment Trust (REIT) are concerned Sebi has put the basic ground rules out there but now the taxation aspect of REIT need to be addressed for them to become reality. Therefore, that's one thing which does need to be addressed by the government. This Budget, next Budget, policy notification in between is for them to decide.
There are some issues pertaining to special economic zones (SEZs), the old demand of dividend distribution tax (DDT) and minimum alternate tax (MAT) abolished in SEZ, which has been a long standing demand of SEZ industry. However, from kick starting demand, this entire thing of enhancing the exemption limit for interest on housing loans, this limits now been there for eight or ten years, so this limit does need to get inflation index if nothing else. Then of course there are other demands like granting the industry, infrastructure status so that the ease of credit especially to the medium size developers eases. So, those are some of the basic steps that do need to be addressed some time.
Sonia: If we do get some clarity on this double taxation on REIT, if double taxation is removed. What kind of a benefit if you could quantify for us, could be for a company like DLF?
A: Instead of quantification the way I look at it is that it opens a new market for both investors and the developers if the double taxation issue is resolved. On the debt side as an example for the rent yielding assets, we over the last couple of months have launched the commercial mortgage backed security which has opened up new instrument on the debt front. Similarly REIT would be an absolutely new instrument on the equity front which should hopefully attract a lot of foreign institutional investors (FII) investment as well and that does open up new avenues for capital as well as a new regime for returns from investor standpoint. So, it will be very good.
I do not want to quantify as to how much quantum we would raise from the REIT and those things because those are still details to be worked out.
DLF stock price
On July 07, 2014, at 11:14 hrs DLF was quoting at Rs 222.80, up Rs 4.00, or 1.83 percent. The 52-week high of the share was Rs 242.80 and the 52-week low was Rs 120.25.
The company's trailing 12-month (TTM) EPS was at Rs 2.96 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 75.27. The latest book value of the company is Rs 82.12 per share. At current value, the price-to-book value of the company is 2.71.
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