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First listings of REIT (Real Estate Investment Trusts) are going to happen within a couple of months. REIT is a boon for small investors who have small budgets and can invest a minimum of Rs 2 lakhs in the real estate sector. People with a small budget can take a small portion of the large real estate pie. REIT provides you with an option among the best properties to buy in India.
Blackstone-backed Embassy which is a major real estate player in the Indian real estate market will be launching its first REIT. It will raise it to approx. $1 billion in order to monetize its rent-yielding commercial properties. It will include assets in the major states like Delhi, NCR, Bengaluru, and Mumbai.
REIT’s are similar to mutual funds and owns a portfolio that provides income-generating properties which will provide regular returns. As of now, there are only commercial assets listed with REIT, among which primary properties are office spaces.
The properties are to be registered with SEBI as well after which units are to be listed on exchanges and traded like securities. Small investors can buy the units from the list of units under REIT and they can make an investment in a property in India.
Despite being small investors people get a safer and better option with REIT. There is minimal risk percentage and also assured returns on your investments. REIT provides a limited liability for unit holders.
In order to ensure a regular income, at least 90% of the cash which is to be distributed must flow to the investors for a minimum of two times in a year. It is advised to invest 80% of the asset in the completed project and only 20% of the asset should be invested in under-construction projects. This will ensure a regular income to the investors.
There is a very common question that will strike every small investor's mind, whether REIT will be able to provide with the same returns they can get from a real investment in the real estate sector. The answer to this question is, maybe not. The expected returns with REIT will be around 7-8% annually. Those who want huge returns (20-30%) should look for some other options.
The popularity of REIT can be estimated by the fact that various large investors from all over the world are planning to invest with REIT. Various realtor companies are eyeing on real estate market through REIT. With the changes made by Government and SEBI from time to time, there are huge chances of REIT's success but the reality will only be revealed with time and hence we should wait and watch if REIT can earn success in the real estate market.
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