Infrastructure- 3 | Economy for UPSC 2024 (Pre & Mains) PDF Download

 Page 1


INFRASTRUCTURE
3
Page 2


INFRASTRUCTURE
3
AIF (ALTERNATIVE INVESTMENT FUND)
AIF refers to any privately pooled investment fund, (whether from Indian or foreign sources), in 
the form of a trust or a company which are not presently covered by any Regulation of SEBI nor 
coming under the direct regulation of any other sectoral regulators in India-IRDA,PFRDA, RBI.
AIFs are primarily aimed at high net worth individuals, and according to SEBI (AIF) Regulations 
2012, the minimum investment from an individual is Rs.1 crore. 
The overall corpus of the AIF should be at least Rs.20 crore and there should not be more than 
1,000 investors at any point in time. 
Also, fund manager or promoter should have contributed at least 2.5% or Rs.5 crore, whichever 
is less, to initial capital.
Page 3


INFRASTRUCTURE
3
AIF (ALTERNATIVE INVESTMENT FUND)
AIF refers to any privately pooled investment fund, (whether from Indian or foreign sources), in 
the form of a trust or a company which are not presently covered by any Regulation of SEBI nor 
coming under the direct regulation of any other sectoral regulators in India-IRDA,PFRDA, RBI.
AIFs are primarily aimed at high net worth individuals, and according to SEBI (AIF) Regulations 
2012, the minimum investment from an individual is Rs.1 crore. 
The overall corpus of the AIF should be at least Rs.20 crore and there should not be more than 
1,000 investors at any point in time. 
Also, fund manager or promoter should have contributed at least 2.5% or Rs.5 crore, whichever 
is less, to initial capital.
3 CATEGORIES OF AIF S
Depending upon on their effect on the economy, the categories are:
Category-I AIFs have a positive spillover on the economy and may get concessions from the 
regulator or government. 
These include venture funds, social venture funds and infrastructure funds, among others.
Category-II includes private equity funds and debt funds and do not get any concessions. 
These cannot raise debt for investment purposes, but can do so to meet their day-to-day operational 
requirements.
Category-III includes hedge funds, and are usually traded to make short-term returns.
A ‘pass-through’ status means that income generated by the fund would be taxed in the hands of the 
ultimate investor, and the fund itself would not have to pay tax on the same.
Only Category I & II AIFs get pass through status. 
In case of category III AIF, all income received by the fund is taxable at its level and any distribution 
made to the unit holders (investors) is tax exempt.
Page 4


INFRASTRUCTURE
3
AIF (ALTERNATIVE INVESTMENT FUND)
AIF refers to any privately pooled investment fund, (whether from Indian or foreign sources), in 
the form of a trust or a company which are not presently covered by any Regulation of SEBI nor 
coming under the direct regulation of any other sectoral regulators in India-IRDA,PFRDA, RBI.
AIFs are primarily aimed at high net worth individuals, and according to SEBI (AIF) Regulations 
2012, the minimum investment from an individual is Rs.1 crore. 
The overall corpus of the AIF should be at least Rs.20 crore and there should not be more than 
1,000 investors at any point in time. 
Also, fund manager or promoter should have contributed at least 2.5% or Rs.5 crore, whichever 
is less, to initial capital.
3 CATEGORIES OF AIF S
Depending upon on their effect on the economy, the categories are:
Category-I AIFs have a positive spillover on the economy and may get concessions from the 
regulator or government. 
These include venture funds, social venture funds and infrastructure funds, among others.
Category-II includes private equity funds and debt funds and do not get any concessions. 
These cannot raise debt for investment purposes, but can do so to meet their day-to-day operational 
requirements.
Category-III includes hedge funds, and are usually traded to make short-term returns.
A ‘pass-through’ status means that income generated by the fund would be taxed in the hands of the 
ultimate investor, and the fund itself would not have to pay tax on the same.
Only Category I & II AIFs get pass through status. 
In case of category III AIF, all income received by the fund is taxable at its level and any distribution 
made to the unit holders (investors) is tax exempt.
REAL ESTATE INVESTMENT TRUST
REITs or Real Estate Investment Trusts are a special type of investment vehicle which operate more like mutual funds but 
invest in real estate properties for returns.
These properties are usually income generating properties, commercial or residential, and the returns from such 
investments are passed on to the investors in the REITs.
Usually REITs' units, issued by fund houses, are traded on the stock exchanges and investors can buy and sell those units 
like stocks.
In developed markets, REITs are one of the most liquid investment products for investing in the real estate sector even 
with a relatively low sum of money than the investor would have if he/she had to invest directly in real estate.
Securities and Exchange Board of India introduced the concept in 2014 to open the cash strapped real estate sector to 
investors. 
But not a single REIT had been created because of restrictive norms. 
In June 2016, SEBI proposed to relax norms governing the REITs in India in a bid to make them more attractive.
If REITs take off, one can invest in the property market with a minimum amount of ?2 lakh, which is far cheaper than 
buying property. 
Page 5


INFRASTRUCTURE
3
AIF (ALTERNATIVE INVESTMENT FUND)
AIF refers to any privately pooled investment fund, (whether from Indian or foreign sources), in 
the form of a trust or a company which are not presently covered by any Regulation of SEBI nor 
coming under the direct regulation of any other sectoral regulators in India-IRDA,PFRDA, RBI.
AIFs are primarily aimed at high net worth individuals, and according to SEBI (AIF) Regulations 
2012, the minimum investment from an individual is Rs.1 crore. 
The overall corpus of the AIF should be at least Rs.20 crore and there should not be more than 
1,000 investors at any point in time. 
Also, fund manager or promoter should have contributed at least 2.5% or Rs.5 crore, whichever 
is less, to initial capital.
3 CATEGORIES OF AIF S
Depending upon on their effect on the economy, the categories are:
Category-I AIFs have a positive spillover on the economy and may get concessions from the 
regulator or government. 
These include venture funds, social venture funds and infrastructure funds, among others.
Category-II includes private equity funds and debt funds and do not get any concessions. 
These cannot raise debt for investment purposes, but can do so to meet their day-to-day operational 
requirements.
Category-III includes hedge funds, and are usually traded to make short-term returns.
A ‘pass-through’ status means that income generated by the fund would be taxed in the hands of the 
ultimate investor, and the fund itself would not have to pay tax on the same.
Only Category I & II AIFs get pass through status. 
In case of category III AIF, all income received by the fund is taxable at its level and any distribution 
made to the unit holders (investors) is tax exempt.
REAL ESTATE INVESTMENT TRUST
REITs or Real Estate Investment Trusts are a special type of investment vehicle which operate more like mutual funds but 
invest in real estate properties for returns.
These properties are usually income generating properties, commercial or residential, and the returns from such 
investments are passed on to the investors in the REITs.
Usually REITs' units, issued by fund houses, are traded on the stock exchanges and investors can buy and sell those units 
like stocks.
In developed markets, REITs are one of the most liquid investment products for investing in the real estate sector even 
with a relatively low sum of money than the investor would have if he/she had to invest directly in real estate.
Securities and Exchange Board of India introduced the concept in 2014 to open the cash strapped real estate sector to 
investors. 
But not a single REIT had been created because of restrictive norms. 
In June 2016, SEBI proposed to relax norms governing the REITs in India in a bid to make them more attractive.
If REITs take off, one can invest in the property market with a minimum amount of ?2 lakh, which is far cheaper than 
buying property. 
REAL ESTATE (REGULATION & DEVELOPMENT) 
ACT
The Act is now in effect.
States have six months to formulate rules and regulations as 
statutorily mandated.
States will have to set up the Real Estate Regulatory Authority’s 
(RERA) and the Real Estate Appellate Tribunals and have only a 
maximum of a year from the coming into effect of the Act to do 
so.