Currently, the market capitalization of Real Estate Investment Trusts (REITs) on Indian stock exchanges is Rs.19000 crore. Mutual fund investment in REITs has increased by six times to Rs. 3,972 crore in the last one year as against Rs. 670 crore in 2019. These numbers indicate growing popularity of REITs.
REITs allow investors to invest in real estate without having to own such assets physically. Similar to mutual funds, REITs create a pool of funds comprising contribution from investors which is invested across various real estate projects including commercial and residential properties to generate regular income in the form of dividend through rental income.
Currently, just like ETFs, investors need demat account to invest in REITs. In addition, investors can invest in debt funds having exposure to REITs.
Cafemutual spoke to stock exchanges and experts like Vinod Jain of Jain Investments and Vishal Dhawan of Plan Ahead Wealth Advisors to understand how you can offer REITs to your clients. Both Vinod and Vishal pointed out that currently there are three REITs that are listed in India. And, there is one mutual fund that offers exposure to international REITs.
Here is how you can add REITs in their client’s portfolio:
- Mutual funds - MFDs can recommend debt funds and hybrid funds having exposure to REITs
- Stock exchange - Buying or selling listed REITs on behalf of the investors requires brokers. MFDs who have stock broking license can offer this product to their clients. Other MFDs can become sub broker to offer this product to their clients
- Collaboration - Ensuring regulatory compliances, MFDs can consider a business arrangement with entities offering PMS focussing on REITs. Since REITs provide an access to quality commercial real estate, they can be an exciting space for the HNIs
Given the increasing popularity of REITs, MFDs must consider exploring opportunities associated with them.
