Meaning | Insider Details | Registered REITs | Returns | REITs And NIFTY | FAQ
Have you heard of REIT? It stands for real estate investment trusts and it continues to be one of the most popular products since time immemorial. In international markets like Singapore, Japan, and even the USA, REIT enjoys widespread popularity. It took some time to become a force in the Indian market but ultimately SEBI formalised the REIT tips and guidelines in October 2013. After bringing in a lot of changes to regulate the REIT, its popularity has surely shot up considerably.
You can also check out the best investment plans in India.
What Do You Mean By REIT?
REITs are investment vehicles whose aim is to pool the money of the investors and then choose to invest it for buying different types of immovable assets. Usually, they are so managed that they will be able to generate a regular income and will bring in capital appreciation as well.
Along with this, they can also be traded on stock exchanges after they have been listed.
The Insider Details For REIT Tips
When you choose to opt for REIT, you must be well-versed in the specifics. It is primarily a three-tier structure and helps in generating the right income for those who invest in it. REITs own and manage different types of real estate properties that are sure to generate income and this is precisely where they differ from mutual funds. While mutual funds are more about bonds and stocks and sometimes gold, REIT is all about real estate.
In order to both operate and manage REIT, you will need the following.
- A sponsor who can promote your REIT by using his capital
- A fund management company whose main task would be to choose the right properties and then operate them
- A trustee has to make sure that the money invested is well managed by the investors.
The REITs That Are Listed In India
As we have told earlier that REIT took some time to get stable in the Indian market. So as of March 2021, India had a total of four registered REITs. Of these, only three are listed so far. Let us see what they are.
- Brookfield India Real Estate Trust
- Embassy Office Parks REIT
- Mind Space Business Park REIT
The SEBI had altered the minimum investment amount in a REIT. Earlier you had to make a minimum investment of Rs.50,000 but it has been cut down to Rs.10,000. Along with this, the trading lot cap of 200 units was revised to a single unit. Mostly it has been seen that it is commercial real estate which is the base investment option in REITs in India.
The Returns
While these investments don’t come with a 100% guarantee of returns, it has been mostly seen that the returns for commercial real estate are likely to range between 8 to 10%. However, if you choose a high-grade office space and everything goes as planned, you may end up seeking returns as high as 15% too.
One reason why a lot of people are afraid of investing in the stock market has to be the volatility. Even mutual funds are subject to market risk. On the contrary, when it comes to REIT, the amount of volatility and the risk present is less. Further, SEBI regulations made it clear that REITs had to distribute 90% of their income to the unit holders. They could do it in the form of interest income, dividends, or both of them.
One more key point is that the time period for REITs is going to be longer here. Expect to keep your investment locked for at least three to five years in order to seek the best returns.
Should You Invest In REIT Tips?
A lot of people wonder whether or not REIT is a safe form of investment. You need to know are you have to learn the basics well. However, there is no denying the fact that retail investors have their best bet at REIT tips for diversifying their portfolio. You can choose this form of investments that come with global activity and good returns.
One of the major factors that adversely impacted REIT tips has to be the coronavirus-induced lockdown. As a lot of companies started migrating to the work-from-home model, the occupancy at the top-grade commercial offices declined. This could be dangerous for REIT as this will end up impacting the rental yield in a very bad manner.
However, as the pandemic got in control and people stepped back into offices, things haven’t got weak. However, one has to be a little cautious and you should not put all your money in one bucket.
Further, the fact that only three REITs are listed in India so far is one of the major bottlenecks. This infers that investors have very limited choices at hand. If you are looking to make a good investment, you will always like to diversify the investments you make. However, it is likely that in the times to come, as more and more listings are added, the right investment is likely to become a profitable affair.
REITs And Nifty Indices
The NSE recently introduced a new eligibility criterion. They stated that REIT and infrastructure investment trusts will also be included in the nifty indices from September 2021. As per the National Stock Exchange, all the equity shares, and the REITs that have been listed and traded or even not listed but have permission to trade can be included in the nifty indices. So, this surely starts a new ball game altogether and could be the start of something big. This factor in itself might be a reason that can show a massive increase in the number of people who choose to invest in REITs.
FAQ
What do you need to invest in REITs?
You will need a Demat account to start with first.
Which was the first REIT to be listed in India?
The Embassy REIT was the very first REIT that was listed in India. This happened back in 2019. Right now, four REITs are listed in India, of which three are registered so far.
What is the base investing unit in REITs?
REIT tips deal in real estate so you basically invest in upscale properties and even commercial areas. The aim is to make the kind of investment that allows you to generate the right returns and that too consistently.
What is special about Kotak international REIT fund?
It is the only international mutual fund in the whole of India that gives you the option to invest exclusively in international REITs.