Research

Affordable housing,
logistics to get a
boost from sovereign
wealth funds

The recently announced measure to grant 100% tax exemption on interest, dividend and capital gains income to sovereign wealth funds investing in infrastructure

March 18, 2020

The Indian Union Budget 2020-21 announced major tax concessions on investments by Sovereign Wealth funds (SWFs). They have been granted 100% exemption on interest, dividend and capital gains income on investments made in infrastructure and other notified sectors. They can avail this benefit up to March 31, 2024 with investment lock-in-period of three years.

SWFs are state-owned investment funds commonly established with revenues generated from trade surpluses, central bank reserves, currency operations, privatisations and transfer payments. As of 2019, 88 SWFs with an estimated AUM of USD 8.1 trillion are active globally.

Source : Preqin
India emerging as SWFs favourite

Investments by SWFs in India improved sharply post 2013 as various policy measures were introduced to attract foreign investments. SWFs hold USD 29 billion of assets under custody (AUC) in India as of December 2019. Of these, real estate and warehousing account for 22% of the AUC, amounting to USD 6.6 billion. The likely impact of tax concessions on the investments and strategy of SWFs is discussed in the paper.

Why are sovereign wealth funds so important for infrastructure investments? This paper reviews SWFs and their investment patterns globally. Want to learn more about the role of SWF investments in India? Read on…

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