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15 December, 2022
At a time when REITs were in the news as a potential vehicle of investment in the real estate sector, the pandemic slowed down the industry and dampened the spirits of the investors. Amidst the economic crisis and correspondingly lower purchasing power of investors, the interest in REITs subsided for a while. Now that the pandemic is almost over and the Indian real estate industry is getting back to health, REITs are back in the spotlight. Key players in the real estate industry often wonder whether REITs will steal the show in the post-pandemic economy.
In India, there are three REITs listed. All these REITs are down by 14% to 16% from their respective 52-week high marks. These are trusts that own properties and operate them to generate a rental income. Besides, the REIT entitiesare already listed on stock exchanges. They operate just like the shares of a company, and offer income in the form of rent. At least 90% of the rental income comes as a yield to the investors. This income is generated from the properties that REITs hold. Investors holding the shares get dividends and interests, which channel the earnings or revenue of these bodies to them.
Since the rental yields are visible, REITs generally promise a steady income in the long term as they get into leases with their vendors. In the Indian stock market, Embassy REIT got listed in March 2019. This was the first REIT to be enlisted in India. The pandemic affected the industry the very next year, leading to a disruption in real estate operations.
With the pandemic going away, the impact on real estate has diminished, and the industry is steadily getting back to health. Therefore, it is expected that investors will find their interest resurging in REITs. These bodies, too, will be benefitting from the improved business environment in the real estate sector. As a result, better returns are probable in the coming years.