Real Estate Investment Trusts or REITs are an innovative way of investing in real estate where you can give your money an exposure of the capital appreciation of the skyrocketing properties in India. You can proportionately invest in commercial properties, high income realty projects and get a regular income in the form of passive income as returns.
Let’s dive deep and understand everything about REITs
What are REITs?
It is an investment vehicle that allows you to invest in income-generating real estate assets. They are registered with the Securities and Exchange Board of India (SEBI) and are managed by a trustee. It helps you generate income from rent or capital appreciation of the underlying real estate assets, which are distributed among the investors in the form of dividends.
How do REITs work?
There are basically two types of REITs in India, equity and mortgage, let’s understand how they works-
Equity:In the case of equity ones, the commercial entities like Mindspace, own the property like offices, hotels, shopping malls and draw rental income, which is distributed to all the REITs holders proportionately.
Mortgage:In the case of mortgage REITs, the commercial entities like above-mentioned mainly look over the financials of properties like residential or commercial, through which they earn interest income. The interest income earned is distributed to the mREITs holders proportionately.
How to invest in REITs in India?
There are mainly three ways of investing in real estate through REITs in India, these are as follows-
Directly through stock exchange: There are mainly three REITs listed in India, namelyREITs in India–Embassy Office Parks REIT, Mindspace Business Park REIT, and Brookfield India Real Estate Trust. You can directly buy through the stock market exchange.
Mutual fund SIPs: If you are looking forward to investing in SIPs and get the benefit of regular investing, you can invest in REITs through mutual funds. There are various options made available by mutual fund companies which are following a real-estate centric approach.
IPO: As mentioned above, there are only three REITs available in India for now through which you can invest in real estate proportionately. They usually come up with the IPO as well for investing in new projects. You can invest in the IPO of any three of them.
Who can invest in REITs?
As such there is no boundation or criteria made for investors, however, you can evaluate whether you can invest in REITs or not by looking at your own financial objectives and risk appetite. You can invest in if-
- If you are willing to invest in real estate but do not have enough corpus to buy the whole property
- If you are looking forward to diversity your portfolio in real estate as well
- If you are looking for an investment with passive income for a particular period of time.
If you are looking forward to investing in real estate but do not have enough capital and expertise to select the best property to invest in, investing in REITs could be the suitable option for you. However, there are various different options available to get decent returns as well. It is necessary to compare the potential returns of the available options and choose the best suitable for your financial objectives.
Anushka Trivedi is a freelance financial content writer. She can be reached at anushkatrivedi.com
Disclaimer: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment-related decision.