Real Estate Investment Trusts (REITs): Structure, advantages, and dangers

Real Estate Investment Trusts (REITs) present buyers with a singular approach to entry the true property sector, providing variety, dividend potential, and liquidity. They permit small buyers to acquire publicity to a diversified portfolio, managed by consultants. REITs additionally supply immediate liquidity and regulatory oversight. 

“Their regulated construction, which gives variety, dividend potential, and liquidity, permits them to be an interesting funding selection,” stated Suren Goyal, companion, RPS Group.

However, earlier than investing in a sure REIT, buyers have to be cautious in regards to the risks concerned and undertake in depth analysis. 

Diversification serves as one of many major benefits of creating investments in REITs. 

“REITs permit small buyers to acquire publicity to a diversified portfolio that’s dealt with by consultants within the subject. This variety helps restrict the potential dangers of investing in a single property or a sure space of the true property sector. Furthermore, as a result of they’re listed on inventory exchanges, REITs regularly present liquidity, permitting buyers to readily purchase and promote shares,” said Subhash Goel, Director of Goel Ganga Developments.

REITs operate on a model similar to mutual funds, allowing investors to own a portion of income-generating real estate properties that would otherwise be unaffordable

“Since their introduction in the Indian market in 2019, REITs have gained popularity as publicly listed investments regulated by the Securities and Exchange Board of India (SEBI). Investing in REITs provides several advantages, including instant liquidity, affordability, safety through regulatory oversight, tax benefits, and the ability to diversify real estate holdings across multiple locations,” stated Sunil Sisodiya, Founder, Geetanjali Homestate. 

“REITs have garnered market approval. They supply a daily revenue stream by means of dividends, distributing a minimum of 90% of their income, that are additionally tax-free,” stated Siraj Saiyed, Director, Arete Group.

However, buyers ought to conduct thorough analysis and consider elements similar to occupancy, tenant high quality, and previous efficiency. Despite challenges, REITs have proven resilience and excessive rental collections through the pandemic.

Catch all of the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint.
Download The Mint News App to get Daily Market Updates.

More
Less

Updated: 14 Jul 2023, 01:40 PM IST