TAX
Funds & REITs
Funds
India is considered an attractive emerging market destination for the commitment of funds. Thus established Private Equity houses, new age Fund Managers and even Family houses are considering setting up fund structures in India. The government has been proactive in establishing an attractive regulatory and tax regime for fund set up in India. Further, there has been consistent stability in these regulations and tax aspects over the last several years. This certainty and clarity enable fund managers to attract investors from all over the world for their India focussed investments. Fund managers and their investors typically evaluate both co-investment and unified structures depending upon several factors such as key geography of fundraising, the number of investors, size of each investment, return expectation of the investors (year on year cash yield, IRR linked exits, etc.), the genre of investments (early stage, growth), etc.
At Transaction Square,
We understand the business of fund management
We partner with
In designing their strategy of fund structure for India focused investments
We extensively evaluate the need for setting up of feeder fund overseas, need for set up of SEBI’s registered Alternate Investment Funds (AIF), structure of the investment manager, their carry, their location and residential status (India or overseas), preferred jurisdictions for setting up overseas Fund (pooling vehicle, feeder fund, etc.), upstreaming of proceeds, tax leakages thereon and options for rationalization, assessment of the applicable FDI regulations in downstream investments, tax implications for the fund itself, exit strategies, etc. Our experienced team helps in implementation of the selected fund structure and undertakes drafting/review of the fund documentation (charter documents of the fund, Private Placement Memorandum, trust deed, contribution agreements, management services agreements, etc.), assists in seeking registration with SEBI as an AIF and provides regular tax and regulatory compliance services as prescribed.
Real Estate Investment Trust and Infrastructure Investment Trusts
REITs
Similar to the concept of REITs, Yield Co’s, Business Trusts, etc. In developed markets, REITs’s and InvITs are structures in India that enable attracting yield-based private investors to the real estate and infrastructure sectors respectively.
SEBI introduced the REIT’s regulations in India in 2014 to attract fresh and patient capital in the sectors of real estate and infrastructure and reduce the burden on the banking system. The regulations provide detailed guidelines on who can be a sponsor (person that can set up such structures to attract capital), manager and a trustee, nature of assets that can form part of these structures (extent of built-up, cash generation assets, assets under construction, etc.), manner of access to the capital market, conditions for minimum fundraising, listing requirements, policies in respect of the distribution of dividends, the extent of potential leverage, etc.
At Transaction Square, our professionals have an extensive understanding of the market for REITs. We provide strategic guidance to foreign and Indian asset owners to evaluate this opportunity to access capital markets, assess feasibility based on the current asset portfolio and pipeline, provide overall guidance on expected valuation, evaluate potential tax leakages and provide an optimum structure for upstreaming cash yield to investors with minimum tax leakages (thereby improving cash return). Our teams have a deep understanding of the regulatory provisions and provide guidance on analyzing and applying the same to every situation, so as to improve the marketability of the asset portfolio, enhance the ability to raise funds, minimize tax incidence on secondary fundraising, plan exit strategies in line with lock-in conditions, etc. We also provide support in implementation by assisting you in drafting and submitting necessary applications to SEBI for seeking registration, suitably liaise and discussing with SEBI at all times. We set up the Trust structure for the REIT/InvIT, set up relationships with independent Trustees, draft/review all contracts/documentation as may be necessary and prepare the business plan from a regulatory perspective.
