Indian Express Explained 02-03/05/2020

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1)Rafale, Goa’s ‘save the frog’ campaign, J-K’s ‘back to village’ programme:

Why in News:- Goa’s ‘save the frog’ campaign, Jammu and Kashmir’s ‘back to village’ programme, scaled down model of Rafale aircraft besides others in Indian Air Force’s tableau were among themes of the 22 tableaux that rolled down Rajpath here during the 71st Republic Day parade.

Jammu and Kashmir, which participated in the parade for the first time as a Union Territory, had the “Back to Village” programme as its theme.  The rich sartorial and cultural heritage of the region was depicted in the tableau with a shawl weaver in the front. The flora and fauna were shown in the middle complemented with Dogra and Kashmiri folk culture.

Goa’s tableau depicted its seashore along with its biodiversity and livelihoods apart from highlighting the state’s campaign to ‘Save the Frog’, an anti-frog poaching campaign.

2) Explained: What is USCIRF, the US body that feels Amit Shah should face sanctions for CAB?

Who are the USCIRF?

On its website, the USCIRF describes itself as an independent, bipartisan US federal government commission that was created by The International Religious Freedom Act (IRFA). “The broad-based coalition that advocated strongly for IRFA’s enactment sought to elevate the fundamental human right of religious freedom as a central component of US foreign policy,” the website says.

And what is the IRFA?

The International Religious Freedom Act of 1998 was passed by the 105th US Congress (1997-99) and signed into law by the then President Bill Clinton on October 27, 1998.

What does the USCIRF do?

The USCIRF is mandated by US statute to “monitor the universal right to freedom of religion or belief abroad — not in the United States — using international standards to do so and makes policy recommendations to the President, Secretary of State, and Congress”.

3)What is a pulse oximeter, and why is it now sought after?

According to John Hopkins Medicine, “Pulse oximetry is a test used to measure the oxygen level (oxygen saturation) of the blood. It is an easy, painless measure of how well oxygen is being sent to parts of your body furthest from your heart, such as the arms and legs.”

The device is generally used to check the health of patients who have known conditions that affect blood oxygen levels, such as heart and lung conditions, and for those who show symptoms such as shortness of breath.

The device measures the saturation of oxygen in red blood cells, and can be attached to a person’s fingers, toes, nose, feet, ears, or forehead. It can be reused or disposed of after use.

Based on the information from the blood oximeter, a healthcare provider can take a decision about whether a person needs extra oxygen.

This disease affects the lungs’ ability to transfer oxygen. It also causes difficulty in breathing. When a person cannot inhale enough oxygen and exhale enough carbon dioxide, the pneumonia can lead to death.

4)All about REITS:-

Real Estate investment Trusts or REITs are mutual fund like institutions that enable investments into the real estate sector by pooling small sums of money from multitude of individual investors for directly investing in real estate properties so as to return a portion of the income (after deducting expenditures) to unit holders of REITs, who pooled in the money.

A REIT in India is allowed to invest mainly in completed and revenue generating assets and other approved investments. Further, REIT will have to distribute majority of its income among the unit holders.

REITS are regulated by the securities market regulator in India- Securities and Exchange Board of India (SEBI). In September 2014, SEBI notified the SEBI (Real Estate Investment trusts) Regulations, 2014 for providing a framework for registration and regulation of REITs in India.

REIT can invest in commercial real estate assets, either directly or through Special Purpose Vehicle (SPVs) which invests more than 80% of its assets in properties. If REIT is investing through an SPV, REIT has to hold controlling interest with not less than 50% of the equity share capital or interest in SPV.

Here “real estate” refers to land and any permanently attached improvements to it, whether on leasehold or freehold, and includes buildings, sheds, garages, fences, fittings, fixtures, warehouses, car parks, etc. and any other assets incidental to the ownership of real estate. But the definition does not include mortgage and any asset falling under the purview of ‘infrastructure’ as defined vide Notification of Ministry of Finance dated October 07, 2013.

This is because a modified REITs type structure for infrastructure projects is done through Infrastructure Investment Trusts (InvITs) for PPP and other infrastructure projects.

Main Features of REITs in India

Structure of REITs

  • REITs are set up as trust under the provisions of the Indian Trusts Act, 1882 and are registered with SEBI. Like a mutual fund, it has three parties – Trustee, Sponsor(s) and Manager – to avoid any conflict of interest issues.
  • The Trustee generally has an overseeing role on the activities of the REIT.
  • Sponsor(s), collectively hold atleast 25% in the REIT for atleast 3 years and 15% thereafter. This is to ensure skin in the game. Sponsor’s responsibilities are to set up the REIT and appointment of the Trustee.
  • Manager means a company or LLP or body corporate incorporated in India which manages assets and investments of the REIT and undertakes operational activities of the REIT. In short, the manager assumes the operational responsibilities pertaining to the REIT. A manager needs to have at least 5 years of related experience coupled with other requirements such as minimum net worth, manpower with sufficient relevant experience, etc.
  • The trustee of a REIT is a SEBI registered debenture trustee who is not an associate of the Sponsor.

Offer of units, listing, investments and distribution

  • Value of the assets owned/proposed to be owned by REIT should be atleast Rs 500 crore.
  • The REIT can raise funds initially through an initial offer and once listed, may subsequently raise funds through follow-on offers.
  • Minimum issue size for initial offer is Rs 250 crore with a minimum public float of 25%.
  • Listing of units in a stock exchange is mandatory in India.
  • The minimum subscription size for units of REIT is Rs 2 lakhs and the trading lot is specified at Rs 1 lakhs so as to allow only reasonably informed investors into this market.
  • Permitted Investments by REIT are:
  • Atleast 80% in completed and revenue generating properties.
  • Not more than 20% in developmental properties and other eligible investments. Provided, investment in developmental assets is not more than 10% of the value of REIT assets.
  • REIT to invest in at least 2 projects with not more than 60% of value of assets invested in one project. Related party transactions are subject to strict scrutiny.
  • REIT to distribute not less than 90% of the net distributable cash flows, subject to applicable laws, to its investors.
  • Maximum borrowing permitted is 49% of the value of the REIT assets. Further, credit rating and post 25% unit holders approval are mandatory to raise debt.
  • Full valuation to be carried out atleast once a year and half yearly updation of the same has to be carried out.

Tax treatments of REITs in India

  • REITs are given “pass through status” from the perspective of income tax. Pass through transactions are those transactions where the ultimate beneficiary, namely, the investor receives the income (as dividends or interests payments) arising out of the loans/bonds/transactions done by a Trust. Since income is ultimately going to the investor, the Trust is exempted from paying the tax while the ultimate beneficiary is taxed. Thus, rental income from real estate assets directly held by REITs are allowed to pass through and are taxed in the hands of the unit holders of the REIT. This was announced in July 2014 in the Union Budget 2014-15.
  • Further, Union Budget 2015-16 proposed to rationalise the capital gains regime for the sponsors exiting at the time of listing of the units of REITs and InvITs, subject to payment of Securities Transaction Tax (STT).  The rental income of REITs from their own assets will have pass through facility.
  • The Union Budget 2016-17 has withdrawn the 17% Dividend Distribution Tax that is applicable on any distribution made out of income of SPV to the REITs and INVITs, having specified shareholding.

Impact of REITs

  • The introduction of REITs in India is expected to significantly benefit the investors as well as the developers in the real estate industry.  REIT are expected to provide an exit route to Indian developers who are struggling to reduce debt, while on the other hand it gives investors the ability to buy into the country’s property market which otherwise may be out of their reach due to the sheer size of the amount to be spent for acquiring such properties.
  • Thus, from the perspective of investors, holding units of REITs is a substitute for investing directly in real estate. This is similar to investing in Gold Exchange Traded Funds (Gold-ETFs).
  • REITs would also enable diversification of the portfolio of the investors and provide the investors a new product that is regular income generating.
  • The freeing up of developer’s capital is expected to bring in more investments in real estate, thereby stimulating growth. Funds locked up in various completed projects can be released to facilitate new infrastructure projects to take off.
  • Assets that may qualify to be included in REITs may reach $20 billion by 2020 (according to an estimate by property broker Cushman & Wakefield). In the first three to five years, as much as $12 billion could be raised.
  • REITs will force much needed transparency at least in the commercial sector, and lower the reliance on financing from banks and incentivize developers to own and manage assets with a long-term view. In a market where price data is almost impossible to come by, this will be a revolution. It will help the investors in making more informed investment decisions as returns can actually be analyzed rather than be based upon anecdotes.
  • Opening up of REITs for foreign investors with support from the budget on such inflows is expected to generate substantial foreign interest for investment in REITs.
  • In time, it will help develop a more mature and liquid market with broad participation from investors.

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