What Is REIT ?
REIT – REAL ESTATE INVESTMENT TRUST is new concept in INDIA but this kind of asset class is very familiar in USA.
DEFINITION OF Real Estate Investment Trust :
REIT is a company that Owns , operates or Finances Income producing Properties (Mostly Commercial Properties- Office). Which generate a steady income stream for investors. REIT also offers capital appreciation.
Real Estate Investment trust seem to work similar to Mutual funds, REIT company’s pool capital from investors to invest in real estate property.
Just like stocks, few Real Estate Investment trust trade publicly. Which makes it a highly liquid asset.
Real estate investment requires high ticket size capital which an individual cannot afford. Small investors stay out of real estate considering it as capital intensive asset class. REIT helps in abolishing the above entry barrier.
Investment in Real Estate Investment trust requires less capital and can be withhold in Electronic format as Units. Any individual having a DEMAT account can invest in REIT’s. So, in order to include real estate into our portfolio we can invest in Real Estate Investment trust. Which in turn invest’s in revenue generating real estate property.
Basically while you invest , you receive Units and not shares of the Real Estate Investment trust company. You might think if not shares then what does this UNITS denotes to ?
So, the UNITS is the investment done by REIT into income generating real estate property. we are indirectly a part owner of property owned by REIT Company.
Lets now understand the different characteristics of REIT. What makes one REIT differ from Another REIT. So, there are multiple ways to identify based on nature of its operation into a particular segment or category.
Based on Investment Type
This kind of REIT focuses on Real estate properties and further rent them to Companies , Industries or individual. Income generated through such investments is further distributes to unit holders or investors.
Mortgage / Debt
In this situation they receive income in the form of EMI for funding company’s or individual to buy real estate. So, they are not the owners of property but provided loan to such company / builders to acquire property.
This is a mix of Equity and Mortgage
Based on Market Type
a) Publicly traded
These Real Estate Investment trust are listed in Exchange and regulated by SEBI
b) Public Non Traded
These Real Estate Investment trust are focused on certain category such as Healthcare REIT’s that focus on HEalth care property, Apartment REIT’s that focus on housing. Similarly there are Self-Storage, Retail, shopping etc.
Conditions or Eligibility for Real Estate Investment Trust in India
- 80% of the investment to allot in revenue generating properties.
- 10% is for investment in under construction projects
- Must update NAV Twice a Financial year
- 90% of income must distribute as Dividend to its shareholder / Unit holders.
- 500Cr should be the minimum investment by REIT.
Advantages of Real Estate Investment Trust in India
- Steady Dividend income and capital appreciation
- Option to diversify
- Transparency in Dealing
Real Estate Investment Trust in India
- Embassy Real Estate Investment trust
- Mindspace Business park Real Estate Investment trust
- Brookfield India Real Estate Trust.
- Avg Return is around 7 to 8 %
- Each company is giving 4.5 to 5 rs per unit every quarter
- Which comes around 19 to 20 Rs per unit per year
Reit comes in various categories and specifications. In end our motive is to take advantage of such asset class. Based on our risk taking apetite and as per our financial advisor we can decied if this is worth enough to invest.
Disclaimer : We don’t recommend anybody to invest in mentioned REIT’s. This content is to provide education on the available investment options.
What is REIT ?
What are the Types of REIT’s ?
2) Based on Market Type
a) Publicly traded
b) Public Non Traded
3) Sector wise
How Many REIT’s available in INDIA ?
b) Mindspace Business park Real Estate Investment trust
c) Brookfield India Real Estate Trust.