Friday, July 28, 2017

Real Estate Investment Trusts - How They Work

One of the fastest growing sectors in India is real estate, with huge prospects in major sectors like housing, commercial, hospitality, manufacturing, retail etc.

Buying a flat or plot of land is the best decision among the investment options and the risk is very low because the rate of property increases within months.

Real Estate Investment Trusts are a good investment option with efforts being made to make these tax-efficient for investors.

 The real estate sector in India has been lucrative for savvy investors over the last decade, but it has not been without accompanying uncertainties.

 It will open up a platform that will allow all kinds of investors  to make safe and rewarding investments into the Indian real estate market.

The best thing about REIT is that investors can start with as small a sum as is required to secure units in exchange.

The REIT platform has already been approved by the Securities and Exchange Board of India (SEBI) and like mutual funds, it will get the money from all investors across the country.
 The money collected from the REIT funds will then be invested in commercial properties that are used to generate income.

It will be registered by an IPO or initial public offering. REIT units and will have to get listed with exchanges and traded as securities with the minimum asset sizes to be invested.

The investors here would have the choice to be able to buy the units from either primary and/or the secondary markets.

It can be used to generate funds from a lot of investors to directly invest in profitable real estate properties like offices, residential units, hotels, shopping centers, warehouses and more.

All trusts with REIT will be listed with stock exchanges as they would be structured like trusts and all assets will be held with independent trustees for unit holders or investors.

They have defined duties which typically involve ensuring compliance and adherence to all applicable laws that protect the rights of the investors.

The objective is to provide the investors with the dividends that are generated from the capital gains accruing from the sale of the commercial assets.

The trust distributes  the income among its investors by dividends, besides the minimum entry level, a REIT is supposed to provide diversified and safe investment opportunities with reduced risks, and under a professional management to ensure the maximum return on investments.


    REIT will showcase the full valuation on a yearly basis and will also update it on a half-yearly basis
    According to the guidelines, they will have to diversify and invest in a minimum of two projects with the highest asset value in a single project
    More than half of the assets will have to be invested into revenue-generating and completed projects to lower the risk of investment.

    The remaining part that include properties like under construction projects, equity shares of the listed properties, mortgage based securities, equity shares that derive a minimum amount of income from Government securities , money market instruments, cash equivalents and real estate activities.

     However, the real estate regulations in place have not had the desired effect due to the market conditions in the country as yet.

    The exemption from tax on the distribution of dividends would also make it a much more attractive option for investors.

    According to a recent report , commercial properties in India that are investment opportunities are of great value across the top cities.
    Investing in REIT can also be compared to other forms of investment like investing in gold bonds.
      The Indian property market is now almost stabilized and it is the right time to buy self-owned homes and while it is better to wait and watch, the market cannot be accurately predicted at the best of times.

      At the end of the day, these are investment instruments and not a means to acquire actual property which is always high on the wish-list.

      A budget that clearly favors purchase decisions for first- time home buyers and is a step closer to make home ownership a reality.






      No comments:

      Post a Comment