In fact, without going out and buying, REIT shareholders get a share of the income generated from real estate investments. (Representative image: Credits: Shutterstock)
Investors can earn regular income in the form of dividends, which are paid out of the rental income that the REIT earns.
Investing in the real estate sector is another way to invest your money and earn higher returns. People invest by buying space in residential or commercial real estate projects. A completely new option in India is Real Estate Investment Trusts (REITs).
REITs are liquid, which allows investors to invest and trade small amounts, as well as represent real estate ownership, leaving the management to professionals.
The real estate sector in India has been in need of an REIT for a long time.
REITs were introduced in India several years ago to attract investment in the real estate sector by monetizing rent-producing assets.
Embassy Office Parks became the first REIT in India to be registered in 2019.
There are currently two other REITs listed on the Indian stock exchanges, Mindspace Business Parks REIT and Brookfield India Real Estate Trust, all of which are leased office assets.
According to the NSE, a REIT is a tiered structure where the Sponsor creates a REIT, which in turn invests in eligible infrastructure/real estate projects, either directly or through Special Purpose Vehicles (SPVs).
When a real estate company decides to create a real estate investment trust, it becomes a sponsor of the REIT and appoints a trustee.
A REIT is a corporation, trust or association that owns and manages a portfolio of real estate and/or mortgages.
The REIT is established as a trust under the Indian Trusts Act 1982 and is registered with the Securities and Exchange Board of India (SEBI).
How does REIT work?
A pool of real estate assets, a REIT can generate regular income and is held like a mutual fund. For example, a mutual fund pools investors’ money and then invests it in the stock market, a REIT collects money from retail and institutional investors and invests in real estate assets.
These are usually commercial real estate assets such as office space, business parks and malls that can generate regular rental income.
In fact, without going out and buying, REIT shareholders get a share of the income generated from real estate investments.
Investors can receive regular income in the form of dividends, which are paid out of the rental income that the company receives.
Types of REITs in India
Impartiality: At the same time, the REIT owns all income-generating real estate through rent. They are the sole owners and rent out properties to various corporations or individuals. The income received is distributed among investors.
Mortgage: They lend money to real estate players. They receive income not from rent, but from EMI or mortgage payments from builders.
HybridA: He combines both owned and mortgage-based property and earns a regular income through rent and interest. This helps investors diversify and earn with both options.
Publicly TradedA: Investors can buy and sell shares of this REIT through the stock exchange.
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Namit Singh Sengar Namit is Senior Associate Editor of News18.com Business Vertical. With over five years of experience, he focuses on personal finance, brands, and economics….Read More