India has always been a land of real estate. As an investment option, real estate in India is preferred more than any other place. This could be in residential sector with properties bought for the purpose of consumption and in the commercial sector for consumption or earning rental income. For long, investment in commercial buildings has been a hassle for the common man with all the hefty documentation and clearances. At the same time, the high ticket can pose a problem for small investors.
Until sometime back, very few investors could include real estate in their investment portfolio. Thanks to a fairly new vehicle, REIT (Real Estate Investment Trust), investment in commercial sector is possible even for small investors. REITs are stock market listed investments that allow exposure to real estate without having to purchase or manage properties. Originated in the USA, REITs have now gained popularity in other places as well. They are similar to mutual funds as they allow a pool of investors to invest their funds. The underlying asset in case of REITs is the real estate holding.
The concept of REITs came to India as late as 2007. The investment vehicle is yet to pick momentum in India. REITs have the ownership of multiple properties and they operate them to generate income. REITs invest in such properties that can earn and generate an income. The amount received in the pooled fund is used for acquiring properties and generating income. Currently India has 3 REITs which are regulated by SEBI. Other big players are expected to enter the market soon.
There are various advantages of investing in REITs including good capital appreciation, diversification of portfolio, chances of earning dividend income as well as good liquidity. REITs are new to India and haven’t gained popularity. Gradually, investors looking to get exposure in real estate might consider REITs as a lucrative vehicle for growth.
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