Looking to invest in REITs: Here Is Everything You Need To Know
May 27, 2017 Home Trading Steps
Even though the real estate sector is most promising area to invest money, it comes with its own risks and uncertainties. The introduction of real estate investment trust will bring more secure and safe investment for the investors. REITs are intended to get more and more Indians in investing in the real estate.
How REITs work:
The investors interested in REIT can start with a small fund of Rs 2 lakhs, to secure units in exchange. The REITs have already been approved by the Securities and Exchange board of India (SEBI). The investments from the investors will be pooled and the acquired money will be invested in the commercial property. The interest received from the same will be divided equally among the investors.
The REITs will have to be registered through initial public offering (IPO) and the listed properties will have to be registered in the exchanges and will be further traded as securities.
The SEBI has kept the minimum assets size to be invested in, at Rs 500 crore while the minimum issue size is fixed at Rs 250 crore. As for the inventory, the investors will be able to buy the property from the primary and the secondary market both.
REITs work towards generating funds from the investor and investing it in commercial properties such as warehouses, office spaces etc. all the REITs need to be listed on the exchange and will be structured as trusts. The independent trustees will hold the REIT assets for the unit holders/ investors. The trustees of REITs have defined roles like keeping the compliances and adherence to all the applicable laws that protect the right of the investors.
The objective of REIT:
The main objective of REIT is to generate the funds for the investors with the dividends that are generated from the capital gains acquired from the sale of the commercial property. Apart from this, the REITs investments are supposed to provide safer and more secure option for investment for the investors.
Advantages of investing in REIT:
How REITs work:
The investors interested in REIT can start with a small fund of Rs 2 lakhs, to secure units in exchange. The REITs have already been approved by the Securities and Exchange board of India (SEBI). The investments from the investors will be pooled and the acquired money will be invested in the commercial property. The interest received from the same will be divided equally among the investors.
The REITs will have to be registered through initial public offering (IPO) and the listed properties will have to be registered in the exchanges and will be further traded as securities.
The SEBI has kept the minimum assets size to be invested in, at Rs 500 crore while the minimum issue size is fixed at Rs 250 crore. As for the inventory, the investors will be able to buy the property from the primary and the secondary market both.
REITs work towards generating funds from the investor and investing it in commercial properties such as warehouses, office spaces etc. all the REITs need to be listed on the exchange and will be structured as trusts. The independent trustees will hold the REIT assets for the unit holders/ investors. The trustees of REITs have defined roles like keeping the compliances and adherence to all the applicable laws that protect the right of the investors.
The objective of REIT:
The main objective of REIT is to generate the funds for the investors with the dividends that are generated from the capital gains acquired from the sale of the commercial property. Apart from this, the REITs investments are supposed to provide safer and more secure option for investment for the investors.
Advantages of investing in REIT:
- Income dividends: 90 percent of the distributable cash, at least twice a year.
- Transparency: REIT will show the revenue generated not only yearly but also half yearly.
- Diversification: according to the norms, the REIT will have to invest in two projects with 60 percent assets value in single value.
- Less risk: 80 percent of the revenue generated will be invested in revenue generating projects. 20 percent will be invested in under construction projects, mortgage based securities etc.
Will REIT make a good investment in India?
Indians are partial towards investing in gold and properties. We will have to wait and see how it turns out, though nothing will beat the feeling of owning a home. Since this year looks promising in the real estate sector we can only hope for the best.
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