Is it beneficial to invest through REIT?


REIT has been a popular concept throughout the world for many years

One of the great features of REIT is that it has a structure similar to mutual funds

The commercial real estate has changed immensely over the last decade, owing to many factors like the extensive use of technology, new business models, changing expectations of investors, and the tenant.  In fact, all these factors redefine the industry of commercial real estate. Many investors accept new demands along with investing millions of dollars in the commercial real estate industry. After the launch of REIT in March, the first Real Estate Investment Trust in India, there is an unbelievable growth in office space leasing.

REIT a popular concept

After the launch of REIT in March, the first Real Estate Investment Trust in India, there is an unbelievable growth in office space leasing. Even if REIT has been a popular concept throughout the world for many years, the guidelines related to it were formalized in India only recently. Blackstone Group Lp., is an American private equity major, is ready to take 20-million square feet commercial portfolio along with realty developer, K Raheja Corp. through the listing of a REIT. Blackstone Group also made another listing with REIT, along with the Embassy Group. The listing of Embassy Office Parks is the first REIT in the country, and both these listings can bring tremendous advancements in the commercial real estate industry.

Know REITs

REIT can be a new term for many readers and get an idea about it will help you to decide whether it is a good investment option for not. One of the great features of REIT is that it has a structure similar to mutual funds. Just like mutual funds, REIT also has unit holders, fund managers, sponsors, and trustees. The underlying asset in mutual funds is stocks, bonds, and gold whereas, in REIT, it is physical real estate. A real estate investment trust (REIT) became a reality in India, and its first IPO (initial public offering) made by Embassy Office Parks with a plan to raise Rs.4, 570 crores. The price per unit is in the range of Rs. 299-300 and its minimum application bid is 800 units. If you are interested in this plan, you need to invest at least Rs.2.4 lakhs. An investor can increase the lot size by purchasing the multiples of 400 units.

This has boosted the investor’s sentiments in real estate sector, once investor’s start understanding this product will see a good growth in first of its kind product. But as this is first of its kind concept in India so as of now there is no past data to compare.

Is it beneficial to invest in REITs?

In REIT, the money collected through IPO is deployed in real estate and the money generated distributed among the unit-holders of each project. Apart from the regular income from leases and rents, unit-holders of REITs also get the income from capital appreciation of real estate. Investing in REIT shall be a good thought. Many companies looking at expansion, especially from the tech world, demand in office spaces with quality infrastructure is growing. Since most of the office spaces in India are leased for long periods, it assures steady returns.

Retail investors can invest through REIT in premium commercial real estate with a low minimum investment. Another great attraction of investing through REIT is that it offers better returns than investing traditionally in commercial real estate. Co-working spaces are another hot area for the commercial real estate sector. Many prominent companies prefer shared workspaces as such office areas offer not only better design and low deposit requirements, but also flexible lease terms. Co-working spaces now forming a good part of the office demand in India and REIT provides opportunities for property owners and other investors to invest to enjoy the potentials of the real estate market.

Real Estate companies are now revisiting their portfolio to accommodate these high rent yielding sector.

How to invest in REIT?

REIT is also a great investment option, and you can invest in it through a Demat account. Studies reveal that the global investment in the real estate industry in India will reach up to Rs 710 billion in a couple of years, which was nearly Rs. 355 billion in 2018. If you are looking for a unique investment option, then REIT can be a good choice for you. In fact, it is a wonderful opportunity to generate wealth for long-term investing.

 

That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.

With this one can say “Mutual Fund Sahi hai”,  so let me do Nivesh