Investing in REIT
REIT is a pooling vehicle which attracts investments from investors across the globe in income yielding commercial assets. It resembles mutual funds, but its dynamics are very different.
By Jayesh Kariya
Contributed by Taniya Dutta, Analyst
For many people, investing in real estate, particularly commercial real estate is simply out of reach, but with REIT one could investment in large commercial projects and avail the benefits of regular income as well as appreciation. The investor is entitled to receive dividend by way of distribution from REIT and the other streams of revenues could include interest income and capital gains on sale of Units of REIT.
As per REIT Regulations, at least 80 per cent of the value of the REIT assets shall be in completed and revenue generating properties. The balance 20 per cent may go in developmental properties, mortgage-backed securities, corporate debt of the real estate sector, equity shares of companies deriving not less than 75 % of their operating income from real estate activity, government securities and money market instruments or equivalent cash. Also read http://realtyplusmag.com/the-next-big-thing-on-tech-agenda-prop-tech-offerings-vary-as-widely-as-construction-brokerage-renting-property-management-automation/
REIT is now permitted to issue debt securities in manner specified by SEBI provided such debt securities are listed on recognized stock exchange in India.The benefits of REIT include access to real estate for small retail investors with limited resources, professionally managed liquidity, regular tax free income and benefit of a diversified portfolio with appreciation in underlying real estate. But, one needs to be aware of risks associated with real estate, market risks, leverage risk at REIT level depending on the type of REIT, regulatory changes, etc.
Read REIT prospectus and “Investment Approach” and “Risks” portions of Offer documents very carefully before investing. Unlike shares of a company, Units of REITs are a completely different product and therefore the investor must possess good knowledge of the real estate sector as well as market forces to invest in a REIT.