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Post-Budget announcement, sovereign wealth funds may ramp up investment in affordable housing, logistics
Moneycontrol  |  February 20, 2020

SWFs hold $29 billion of Assets Under Custody (AUC) as of December 2019

 

With Budget 2020 granting 100% tax exemption on interest, dividend and capital gains income to sovereign wealth funds investing in infrastructure, the research wing of property consultancy firm JLL India said.

 

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 percent of the AUC, amounting to $6.6 billion.

 

The Union Budget for 2020 further incentivises SWFs to invest in infrastructure by providing them a 100% tax exemption on interest, dividend and capital gains income in respect of investment made in infrastructure and other notified sectors before March 31, 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 and warehousing, which have been accorded infrastructure status.

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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 percent with Asia garnering the highest share (42 percent).

 

"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," said Ramesh Nair, CEO and country head, JLL India.