V Nagarajan

The measures announced recently in the Union Budget granting 100 per cent tax exemption on interest, dividend and capital gains income to Sovereign Wealth Funds (SWFs) investing in infrastructure, will further help boost investments in affordable housing and logistics, according to JLL research.

India seems to have gained a major impetus following some positive policy backing and the ecosystem in general thus helping boost the image of the country as a favourite destination with SWFs.

Sovereign wealth funds are state-owned investment funds commonly established with revenues generated from trade surpluses, central bank reserves, currency operations, privatisations and transfer payments.

Between 2008-18, global Assets Under Management (AUM) of SWFs grew at a CAGR of 10 per cent with Asia garnering the highest share (42%).

“Sovereign wealth funds have been playing a pivotal role in investments globally with estimated AUM of $8.1 trillion as of 2019. Investments by SWFs in India improved sharply as a result of various policy measures introduced to attract foreign investments.

The Union Budget for 2020 has further incentivised SWFs to invest in infrastructure including affordable housing and warehousing by providing tax exemptions. The rise in potential returns is expected to drive more SWF investments in India. SWFs would be more inclined to use the direct investment route as compared to investment platforms,” according to Ramesh Nair, CEO and Country Head, JLL India.

Investments by SWFs improved sharply as various policy measures were introduced to attract foreign investments.

In India, SWFs hold $29 billion of Assets Under Custody (AUC) as of December 2019. Of these, real estate and warehousing account for 22 per cent of the AUC, amounting to $6.6 billion.

“SWF Investments quadrupled to $5.3 billion during 2014-19 from $1.3 billion recorded between 2005 and 2013, due to various reforms introduced in the Real estate sector. Going forward we expect more traction from this type of patient capital,” said Dr Samantak Das, Chief Economist and ED, JLL India.

The Union Budget for 2020 further incentivises SWFs to invest in infrastructure by providing them a 100 per cent tax exemption on interest, dividend and capital gains income in respect of investment made in infrastructure and other notified sectors before 31st March, 2024 with a minimum lock-in period of 3 years.

The resultant increase in potential returns is expected to boost investments by SWFs in affordable housing and logistics & warehousing which have been accorded infrastructure status.

I own residential and commercial property in Hyderabad and wish to raise short-term funds by mortgaging the unit. What are the procedures involved while mortgaging the unit to a financial institution? Please clarify. Srinivas Reddy, Sharjah.

You can mortgage the commercial property without the need to obtain permission from any quarters. NRIs/PIOs can mortgage to an authorised dealer/housing finance institution in India without the approval of Reserve Bank. However, if you wish to mortgage the property to a party abroad then prior approval of the apex bank is required.

I intend gifting my apartment to my younger brother in India. Is there any permission required from any authorities and does it attract any tax? Please clarify. Allwyn Fernandes, Dubai.

There is no need for any permission from any authority required while gifting the property to your brother in India.Similarly there is no capital gain if the property is transferred through gift. However, the income accruing from the gifted property will be taxed in the hands of the donor, in accordance with the Income Tax Act.

If your brother plans to sell the gifted property either now or at a later date, he has to pay capital gains tax. For this, the cost of acquisition will be the cost at which you had acquired the property.

I am in the Gulf for the past five years and due to inherit immovable property from another NRI, my relative living in the Gulf. Are there any restrictions or do we need RBI permission for inheriting property? Please advice. Deepak Mehta, Dubai.

As an NRI you can inherit immovable property from a person resident in India or a person resident outside India.

However, the person from whom the property is inherited should have acquired the same in accordance with the foreign exchange regulations applicable at that point of time.