Everything to know about REIT Investment
May 07, 2019 Real Estate News
Back in 2014, the government announced that they were starting with the process to set up Real Estate Investment Trust (REITs) in India. In 2016-17 financial budgets, Finance Minister Arun Jaitley announced several tax deductions for the investment in REITs.
Mr Jaitely announced that “To stimulate housing activity, I propose that any distribution made out of an income of SPV (Special Purpose Vehicle) to the REITs and InvITs(Infrastructure Investment Trust) having specified shareholding will not be subjected to dividend distribution tax.”
We discuss everything you need to know before investing in REITs below:
The Embassy Group, which is one of the biggest real estate developers in India, launched India’s first REIT. They were able to raise a sum of Rs 4750 crore through the issue of units at Rs 300 a piece. It is expected that it will reduce their debt by 85 percent after the issue.
Mr Jaitely announced that “To stimulate housing activity, I propose that any distribution made out of an income of SPV (Special Purpose Vehicle) to the REITs and InvITs(Infrastructure Investment Trust) having specified shareholding will not be subjected to dividend distribution tax.”
We discuss everything you need to know before investing in REITs below:
What is REIT?
Real Estate Investment Trusts (REITs) are the companies that will work just like any other investment company and will work in the real estate sector. They will pool money from the stakeholders and the benefit from the investment will be passed onto the investors equally. Under the India Trusts Act, to be set up as a ‘trust’, REIT will have to include a trustee, sponsor, manager and principal valuer. SEBI has permitted REITs to raise funds before registration with them.Who will be the REIT?
In the beginning, the government will only allow the prominent and trusted players of the real estate market to set up REIT. To ensure maximum liquidity, the minimum initial offer size has been capped to Rs 250 crore. If you are looking forward to being an investor, you can start with a minimum of Rs 50,000.The Embassy Group, which is one of the biggest real estate developers in India, launched India’s first REIT. They were able to raise a sum of Rs 4750 crore through the issue of units at Rs 300 a piece. It is expected that it will reduce their debt by 85 percent after the issue.
Where does REIT invest?
It is the norm that the REITs have to invest at least 90 percent of their funds' incomplete revenue generating properties. Rest 10 percent can be used to invest in under construction properties and other assets. It is also mandatory for the REITs to share their 90 percent fo the revenue with the investors and stakeholders. There’s a lot of confusion with the investors regarding the lock-in the period. But unlike real estate, the REIT will allow the investor to invest as and when they like. There is no pressure.Where are REITs trade listed?
Just like mutual funds, the REITs will be traded on the stock market. The investor will be able to track down their investment in the farming market. Unlike the stock market, the profit in the REITs will be much higher. The investors will also be able to channel their money in different assets. There are still other REITs on the way, and the work is still in progress. The government is making sure that only the players who have the minimum asset size of Rs 1000 crore will be allowed at first.Looking for property portal?
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