I read an article that a new REIT is being offered through an IPO. Can someone explain, how this concept of REIT works and how can I invest?
A Real Estate Investment Trust (REIT) is a body trust holds and operates income-generating real estate assets. REITs own various types of commercial real estate, ranging from office and apartment complexes to warehouses, hospitals, lodges, motels to shopping malls. REITs provide investors with a liquid way to invest in real estate which is otherwise illiquid.
In the developed markets, you will find REITs based on the sector they operate in. These have investments in Offices, Industrial spaces, Retail, Hotels, Residential complexes, hospitals, data center, etc.
The REIT market is close to $2 Trillion worldwide with a majority of the REITs based in the US.
Structure of a REIT
REIT Management Company- It is the core to the REIT and acts as an agent to collect funds from prospective investors and utilize them on purchasing properties (in case of Equity), or Mortgage Securities (in case of Mortgage). It handles all the legalities such as Tax filings, licenses, environmental clearances, Audits, etc
Property Management Company - It invests the available funds in resourceful properties or securities and manages them including maintenance, repairs, and recovery to suit the projects for long-term use
Unit Holders - They are the investors in the REIT and hold unit shares amounting to a certain value. No unit holder can hold more than a certain amount of unit shares (usually not crossing 25%). They are given rights such as yearly reports and other information seeking services.
Trustees - Trustees are a group of investors elected from the list of Unit Holders and members of the REIT Management Company who look over operations for the best interest of the Unit Holders.
Between 2009 and 2019, the Dow Jones All Equity REIT Index delivered a CAGR of 16.7% while the MSCI US REIT index gave a return of 17.95% annually.
Just like other investment (Equity/Mutual Funds) products, REITs carry risks of market movements and management practices.
While the returns from 2009 to 2019 have been overwhelming, the REIT market saw a 50% drop in market capitalization during the 2008-09 Housing Bubble and Credit Crisis
You can find useful information on how REITs work and data from the US markets on REITs on reit.com
Embassy office park REIT ipo already open and will close on 20 March . listing at nse/bse. need informed guidance if i say that BSE listed controversial company Mac charles ltd belong to this same group ?
Hi, am looking to invest in REITs. On NSE, currently the price quoting is of 1 unit (if am not wrong). Is there any minimum investment/units required to buy or one can buy like equity?
This article says, initial investment required is Rs 50,000. Am little confused, initial investment mean, in the PRIMARY MARKET (REITs launch), and not in Secondary Market. Please correct me if am wrong.
- Small Initial Investment: As mentioned earlier, one of the key problems associated with making Real Estate investments is the large ticket size especially in the case of commercial properties. REITs require a much smaller initial investment of around Rs. 50,000 to provide similar portfolio diversification benefits**
The REIT’s trade with a lot size of 200. So to buy one lot of REIT’s in the secondary market you’ll have to invest CMP * 200 (Lot Size).
Appreciate for the response… are there only charges levied during the time of SELL is STT & Stamp Duty etc like it is applied on stocks? or there is more to it…
Real estate investment trusts (“REIT”) allow people to invest in the expansive area, income-producing real estate. A REIT is a company that owns and typically works income-producing real estate or similar assets. These may involve office buildings, hotels, shopping malls, apartments, warehouses, and resorts. Unlike other real estate companies, a REIT does not grow real estate properties to resell them. Instead, a REIT purchases and develops properties primarily to operate them as part of its investment portfolio. You can invest in a publicly traded REIT, which is prepared on a major stock exchange, by purchasing shares through a broker. You can buy shares of a non-traded REIT through a broker that engages in the non-traded REIT’s offering. You can also buy shares in a REIT exchange-traded fund or REIT mutual fund.
@ShubhS9 can any of the 3 RIETS (Embassy, Mindspace, Brookfield) be pledged for collateral ?
No. REIT’s aren’t currently approved for pledging.
RIET owns various estates and properties and funds are invested in those properties which have the potential of generating income and can give good returns.
Continuing the thread further with another query related to recent reforms brought by SEBI.
When are we expecting the REITs lot size (equivalent to 1 stock) to change along with investment value to 10-15k from current 50k?
The exact dates on which the changes will come into effect aren’t known yet. Exchanges will release a circular whenever the changes are about to come into effect.
Only when all 3 reaches 52 week high, then exchanges will issue a circular