INDIA Law and Practice Contributed by: Vivek Chandy, Archana Tewary, Kumarmanglam Vijay and Brijita Prakash, JSA
• concession agreements; • development agreements; and/or • lease-cum-sale agreements.
and regulating the operations of the entity. LLPs are incorporated under the LLP Act. Foreign investment into LLPs engaged in construction development requires regulatory approval. The costs for setting up companies or LLPs in India are about the same but the cost of opera - tions for a company would likely be higher than the cost of operations for an LLP. Partnerships can also hold land, but foreign investment in partnerships requires regulatory approval. It is relatively inexpensive to set up and register partnerships, but this may not be a preferred structure since the liability of the part - ners is not limited. REITs are set up and operated in accordance with the SEBI (REIT) Regulations 2014. Typically, foreign investors prefer private lim - ited companies, while domestic investors pre - fer partnerships and LLPs for smaller holdings. LLPs are also increasingly preferred for smaller ownership of holiday/luxury rental real estate on a time-share basis or similar arrangements. Companies are generally subject to corporate income tax at 22%, 25% or 30% (subject to applicable surcharge and cess), as may be appli - cable. LLPs are subject to income tax at the rate of 30% (plus applicable surcharge and cess). REITs are granted limited pass-through status by a special income tax regime, due to which cer - tain income is taxed directly in the hands of the investors. Interest and dividend income received from special purpose vehicles (SPVs) as well as rental income received from immovable property held directly by the REIT are subject to tax in the hands of the investors of the REITs, subject to conditions prescribed. Any income which has
The property is conveyed in favour of the allottee only upon compliance with the conditions in the agreements. Where land is allotted by the government, approvals for implementation of the project can be quickly obtained. In some large projects, the developer may be required to lease/relinquish a small portion of the property in favour of the electricity supply company for the setting up of a power supply substation. 4.7 Enforcement of Restrictions on Development and Designated Use Authorities enforce the above-mentioned regula - tions and restrictions if the development is not in compliance with laws, and approvals such as the completion/occupancy certificate evidenc - ing completion of the project will not be given. Further, the authorities may also initiate action in case of non-compliance or violation of appli - cable laws, including imposing high penalties or ordering the demolition of the buildings. 5. Investment Vehicles 5.1 Types of Entities Available to Investors to Hold Real Estate Assets Real estate assets can be owned/held by private limited companies, public limited companies, LLPs and partnerships, as well as REITs. 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity Private and public limited companies must be incorporated under the Companies Act and must adopt charter documents setting out the objects
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