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India proposes relaxing rules for REITs, offshore fund managers

[MUMBAI] India's capital markets regulator proposed on Friday relaxing rules for real estate investment trusts (REITs), including allowing them to invest a larger portion of their funds in assets under construction.

The changes proposed by Securities and Exchange Board of India (SEBI) are intended to woo investors to the country's capital-starved property sector.

The regulator said it will issue a consultation paper seeking comments from stakeholders, according to a statement issued after its board meeting.

SEBI also said it would consider changing the number of sponsors allowed in REITs, currently set at three, removing certain restrictions on special purpose vehicles, and relaxing some requirements for clearing related party transactions.

India introduced REITs in 2014 to generate capital from abroad and help developers reduce their debt, but the trusts have failed to take off so far as cumbersome regulations and high tax have limited investor interest.

The regulator also proposed changes that would make it easier for eligible offshore fund managers to relocate to India, including allowing them to register as portfolio managers or as investment advisers.

Offshore fund managers who invest in India now typically work from countries such as Mauritius and Singapore, which offer easier and more attractive tax regimes.

To promote fund management in India, Finance Minister Arun Jaitley proposed in last year's budget that an offshore fund with a manager located in India should not be subject to tax under certain conditions.