REAL ESTATE
REAL ESTATE .
REIT in INDIA
Real Estate Investment Trust (REIT) in India A Real Estate Investment Trust (REIT) is an investment instrument that offers proportionate ownership of an income-generating real estate asset to retail investors. Historically in India, investors have been investing in real estate by purchasing a property or land via real estate developers and property brokers. In such investments, investors had to rely on long-term market value appreciation of the property to generate a return on investment. This, however, was only possible when real estate markets would be on an upswing.
TYPES OF REITs
Equity REITs Boutique
These REITs primarily invest in offices, residential complexes, industrial estates, hotels etc. They buy, manage, set-up and sell real estate. The income earned is distributed to investors as dividends. Income is mostly generated through rentals and sale of properties.
Mortgage REITs Boutique
These REITs loan out money to buyers of real estate, and some may even buy-out existing mortgages. They are also referred to as mREITs. These derive income from the interest received through mortgage loans. They work somewhat like a debt mutual fund, however, the risk component is often higher in REITs.
Retail REITs Market
Retail REITs invest in the retail segment like shopping malls, grocery stores, hypermarkets, supermarkets, etc. However, retail REITs do not run these retail outlets. They only focus on renting out the space to various retail tenants. Returns in this case depend on the performance of the retail sector.
Residential REITs Projects
Residential REITs buy and operate apartment buildings, gated communities, and other such housing establishments. Whenever the residential property demand in India grows, these REITs reflect a positive growth.
How DO REITs WORK
The flowchart below shows the basic process of a REIT transaction:
A REIT is set up in the form of a trust registered with the stock market regulator Securities and Exchange Board of India (SEBI).Stakeholders involved in a REIT are Sponsor, Trustee, Manager, Unitholders, Independent valuer additionally, auditors, registrar and transfer agents, merchant bankers and custodians may be appointed by the manager, to carry out activities incidental to the operation of REITs and additionally, meet the requirements of law.
WHICH REIT IS BEST IN INDIA?
- Blackstone Group-backed Embassy Office Parks REIT (Embassy) launched India's first REIT back in April 2019.
- Mindspace REIT was oversubscribed 12.96 times at the time of its IPO in June 2020.
- Embassy and Mindspace were the two main listed REITs in India till early 2022. These traded at approximately 10%-20% premium of their respective listing prices. This is apart from the periodic interest payments which yield about 6%-7.5% post tax returns.
- 2022 also saw the launch of Brookfield India Real Estate Trust's Rs. 3,800 crore REIT issue.