Many people feel that they have a property, and they can get a monthly rent from it, also generate a passive income.
Actually, new property get at high prices so many people can’t afford that, and many places do not get good rent, and where rent is reasonable, the prime location is available at a high price.
What Is REIT?
We invest in Mutual Funds by purchasing small units, and a fund manager manages those units, and we get a small profit out of the profits as how much we have.
Now in REITs, it is like that. Many people collect money, and create trust and generate rental income by investing in suitable property; these are called REIT or Real Estate Investment Trust.
SEBI also governs REITs. REITs work on the same rules that SEBI created in 2014.
Mutual Funds Vs REIT:
| Comparision | Mutual Fund | REIT |
| Minimum Tickt Size | Rs.500 | Rs.5000 |
| Investment Platform | Through Demat Account | Through Demat Account, Mutual funds official Websites |
How To Invest In REIT:
The REIT is listed on Stock Exchange, so buying and selling will be done through Demat Account. REITs invest only in the Real Estate Sectors.
REITs Minimum 80% investment is required to invest in revenue-generating properties and 20% in under-construction properties.
In 2019, Embassy REIT’s IPO came when its application form or minimum ticket size was around two lakhs rupees. But now other new REITs will get at around 50,000 Rupees.
Advantages of REITs:
- You can buy a stake in expensive property of the country through REITs.
- Locations like BKC, Metro Cities, and many more, from these properties you will generate the income.
- REITs have expert and professional teams who buy properties at a suitable location; they know the laws; they do the right documentation. This makes your investment more secure.
- If you had some amount and had to invest in property, you would have to do a lot of research, inquiries many more. And you would also find the property at a prime location quite expensive. And if you invested directly in REITs, you would get a stake in your prime location.
- If you have the money to buy one property, you can invest only in one property, but if you invest in REITs with the same money, your diversified investment will be done. If REITs have invested in 10-20 properties, you will get a stake in them.
Should we invest in real estate stocks instead of REITs?
There are many companies in the stock market related to real estate, but how will investing in REITs be beneficial? See, there are not many rules on real estate stocks.
Due to this, if the company working in the under-construction project and for some reason, the project stopped, the company’s fundamentals are affected, and the prices of the stocks can be fall. And even if a project is done more than the scheduled time, it isn’t right on the company’s stock.
REITs invest 80% money in existing properties, so there is no problem of stopping the project. Minimum twice a year units holders get 90% of whatever money is left with the trust after expenses. Means you will get a good income through best properties.
Whether or not the real estate company gives you profit dividends, REITs will give you 90% of the profit minimum twice a year.
How many Returns should expect from REITs?
One you get income twice a year as a dividend. We cannot expect their fixed return, but we can expect 5% or 6 % as a dividend, also you can expect 7%.
Capital Appreciation:
If your property price increases in few percentages like before the property price were 1 lakh and its price have been increased to 1.5 lakh today, then the cost of its units will also increase by that percentage, and you will get good profit while selling that property.
You can expect 5-6% of capital appreciation from REITs.
There are two REITs present at the present time; there is a possibility of getting many REITs in the coming time, so you can do a good analysis at that time and invest in good REITs.
