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5/10/2019

A Look At How REIT In India Could Impact The Real Estate Segment

REIT or Real Estate Investment Trust is an investment instrument, for both institutional and retail investors into the real estate sector. The introduction of real estate investment trusts (REITs), will provide a platform to change the Indian property market as an investment avenue. It is an investment that enables all kinds of investors to make secure and rewarding investments in the realty sector.

An investment instrument that is popular in different global capital markets now opened its initial public offering (IPO) launched by Embassy Group, a real estate developer, backed by Blackstone, a global investment company on March 18, 2019, and closed on 20 March 2019. REIT is one of the most awaited events for the real estate sector for the highly sluggish real estate sector in India. It is likely to be beneficial for realty developers and investors alike.

The challenges of real estate sector in India is the presence of organised and unorganised real estate players, transactional issues, lack of transparency and accountability, etc, all of which are now being addressed through REIT. Since REIT is highly regulated, it will bring a more transparent picture. However, the Indian real estate sector as an asset class was out of reach for a Retail Investor till now. With the introduction of REIT in India, now it presents an attractive proposition for a retail investor to include real estate as a part of his/her investment portfolio. 

REIT has the following benefits:

Perks of investing in REITs in India:

Income through dividends:

According to the guidelines framed by the Securities and Exchange Board of India (SEBI), REITs are to distribute 90% or more of its income generated to investors or unit holders twice a year.

Transparency:

One of the biggest benefit through REITs as the trustees cannot hide any relevant details as all the critical information is available online for its investors.

Diversification:

According to the guidelines, REITs are required to invest money in a minimum of two projects with up to 60% asset value in one project.

Owning asset class:

REITs allow individual investors to buy shares of the income produced through commercial real estate ownership besides getting professional guidance from the property managers.

Lower risk: 

According to the rules, REITs have to put 80% of the money into revenue-generating assets such as its commercial spaces, offices, or rental accommodations. The rest 20% can be into upcoming projects, equity shares of the listed properties and mortgage-based securities. This lowers risk for any investor.

REITs in India: A Worthy Investment Option?

All the above advantages will make the entry of REITs in India a positive move for both investors and for the highly sluggish the real estate sector. Investors will earn profit from the unique advantages that these investment instrument instruments offer in terms of originating value from the appreciation of real estate and a diversified investment portfolio. The real estate segment will be given a boost in terms of capital inflows and infuse investor confidence.

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