The real estate sector is to get a major boost by real estate investment trusts by enabling people to invest more in the Indian property market. Let's see how it works and how people treat this investment avenue.

Here are a few details about it:

How does it work?
REIT will be generating funds from a lot of investors to directly invest in properties like offices, residential units, hotels, shopping centers, warehouses, etc. All REITs will be listed with the stock exchanges, as they would be structured like trusts. Consequently, REIT assets will be held with independent trustees for unit holders/investors.

Role of the trusties in a REIT
The trustees of REITs have defined duties, which typically involve ensuring compliance and adherence to all applicable laws that protect the rights of the investors.

The objective of REITs
A REIT’s objective, is to provide the investors with dividends that are generated from the capital gains accruing from the sale of the commercial assets. The trust distributes 90% of the income among its investors via dividends. Apart from minimum entry level, a REIT is supposed to provide diversified and safe investment opportunities with reduced risks and under a professional management, to ensure maximum return on investments.

The advantages of REITs include:

    Income dividends: 90% of distributable cash, at least twice in a year.
    Transparency: REITs will showcase the full valuation on a yearly basis and will also update it on a half-yearly basis.
    Diversification: According to the guidelines, REITs will have to invest in a minimum of two projects with 60% asset value in a single project.
    Lower risk: At least 80% of the assets will have to be invested into revenue-generating and completed projects. The remaining 20% include under construction projects, equity shares of the listed properties, mortgage-based securities, equity shares that derive a minimum of 75% of income from government securities or G-secs, money market instruments, cash equivalents and real estate activities.
    Although the concept of REITs, has been in the news for some time, the regulations that have been rolled out so far, have not helped to increase their popularity. Exemption of REITs from tax on the distribution of dividends, would make it much more attractive for investors. According to a recent report by Cushman & Wakefield, commercial properties in India that are ‘REITable’ investment opportunities, are between $43 billion and $54 billion across the top cities.

    Are REITs more attractive than actual property purchase?

    Investing in REIT, can be compared to investing in gold bonds. Indians are partial to buying physical gold, rather than in gold bonds. Similarly, having one’s own property will always provide Indians with greater satisfaction, than mere paper investments. The Indian property market has almost stabilised. While it is human tendency to wait and watch, the bottom of the market cannot be fathomed accurately at the best of times. With the Union Budget 2017-18 clearly favouring first- time home buyers, 2017 may certainly be the year to make home ownership a reality.

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    These are findings from online portals. We can discuss real time queries and doubts here in this thread.

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  • So, what is the update on REITs? Is the market keen on indulging in such an affair, post RERA and other major developments (Demonitisation and all :) )
  • Well, some time ago there had been news about large foreign institutional investors having received approval by SEBI to invest in India as developers and real estate investors under REITS. The companies included Japan’s NikkoAm StraitsTrading Asia and the US’ North Carolina Fund, as the major ones. Other names included Malaysia’s Hwang Asia Pacific Reits and Infrastructure Fund, Taiwan’s Eastspring Investments and Canada-based Sentry Global.
  • Oh good! No Indian company? :)
  • Well, as much as published online there were a few who had registered with SEBI - IIFL Holdings and Embassy Office Parks! The first listing was to come out later in this year but not sure if it is out yet.
  • More on REIT News: K Raheja Group and Blackstone's Mindspace Business Parks REIT has raised Rs 1,518.74 crore from anchor investors ahead of its public issue that will hit the capital market on July 27. Mindspace has proposed to raise up to Rs 4,500 crore from the public issue, which will close on July 29.