A retail investor has to put in at least Rs.2 lakh in REITs and dividend rules allow for stable income
Real Estate Investment Trusts (REITs) are in the news, with analysts bullish about the potential in India and the Securities and Exchange Board of India looking to tweak norms – a process that will begin as early as next week including circulation of a consultation paper to amend the regulations of 2014, to encourage investments. Here is a ready-reckoner that will help in understanding what an REIT is, how it works, and the potential investment risks:
What are REITs?
REITs are similar to mutual funds. While mutual funds provide for an opportunity to invest in equity stocks, REITs allow one to invest in income-generating real estate assets.
How does an REIT work?
REITs raise funds from a large number of investors and directly invest that sum in income-generating real estate properties (which could be offices, residential apartments, shopping centres, hotels and warehouses).
The trusts are listed in stock exchanges so that investors can buy units in the trust. REITs are structured as trusts. Thus, the assets of an REIT are held by an independent trustee on behalf of unit holders.
