REITs (real estate investment trusts) have marked their worthy place in developed markets like the USA and UK, and the Indian audience has recently started exploring this real estate investment concept. As the market is in its infancy, Indian investors are bound to have several questions regarding the credibility of REITs.
A REIT is a company that makes investments in income-generating real estate. Investors who are interested in the asset can buy shares of a REIT and share ownership. There are several ways an investor can add a REIT to their portfolios. Here’s a beginner-friendly guide to understand the different types of REITs and its pros and cons.
In the Indian market, REITs are becoming a popular choice for investors who want to diversify their real estate investments. In 2021, two positive developments took place in favour of real estate investment trusts.
The Future Of REITs in India
Initially, the trading lot size of a RIET was 200 and upwards. To make it affordable for smaller investors, the size has been reduced to one. This move will increase the trading volumes, liquidity, and result in better price discovery in the long run.
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SEBI has also made provisions to include REITs in indices, as was not the case earlier. This hampered the recognition of this investment class in the market and witnessed a smaller investor base. Real estate in India is a highly valuable asset that holds massive growth potential and emotional value. REITs enable a more democratic approach to real estate by exposing the target investors to a diversified portfolio consisting of various income-generating commercial properties at affordable prices. Traditionally, owning a commercial real estate property in India was only a league for seasoned investors. The general, working-class public could not own a CRE on accounts of its being highly expensive. Via REITs, it’s possible for regular investors who gravitate towards residential properties to get fractional ownership of CREs.
How Safe Are REITs?
If you are an aggressive investor and looking to add commercial properties to your long-term investment portfolio, a REIT is a good starting point. As the market matures in India, the future holds the possibility of having more REITs which can help you diversify your investments among two three similar assets.
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