If you are looking to invest in real estate to diversify your portfolio, but don’t want to invest large amounts of money, the best way to do it is through a REIT.
Comparatively a new way of investing, REITs are investment vehicles that own, operate and manage a portfolio of income-generating properties for regular returns. ANAROCK Group Chairman Anuj Puri said that at present, they invest largely in commercial assets – mainly office space.
Post its registration with SEBI, the units of REITs will have to be compulsorily listed on the exchanges and traded like securities. Like listed stocks, small investors can buy units of REITs from both the primary and secondary markets.
Thus, apart from low entry levels, REITs offer investors a safe and diversified portfolio at minimal risk and under professional management, thereby ensuring a good return on investment. REITs will not only feature investments in real estate properties – they will also offer limited liability for all unitholders.
He is not everything. As per the guidelines, 80% of the assets should be invested in completed projects, and only 20% will be in under-construction projects, equity shares, money market instruments, cash equivalents and real estate activities.
What is the basic difference between direct real estate investment and REITs?
Investors in REITs are investing in a diversified portfolio of commercial real estate properties. With the direct investment route to commercial office locations, investors invest in a single office property.
What is the difference between REIT and real estate investment returns?
Small investors will raise a pertinent question – will REITs be able to deliver the same return on investment they can expect from a ‘real’ real estate investment? The answer is no. Certainly, investors who are expecting unrealistic returns (>20-30%) will need to look elsewhere. It’s important to be realistic in your expectations of returns from REITs. The actual ROI would be expected to be in the range of 7-8% per annum, after adjustment for fund management charges.
With REITs, the ROI will be highly structured, realistic and risk-averse. REITs are ideal for investors who want steady income with minimal risk. In addition, investors can earn two types of income from REITs — one through capital gains following the sale of REIT units, and the other through dividend income. In addition, REITs would be a good investment option for investors who wish to diversify their portfolio beyond the gold and equity markets.
Is it still too early to invest in REITs?
REITs have already been launched in India and have given very good returns for the investors. Successful REIT listings in India have fueled interest in this new investment avenue and we expect more REIT listings to be announced soon.
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