Real Estate is one of the most profitable and lucrative markets in the Indian economy. Rising costs and inflation have reached remarkable highs in the last two decades as more foreign investment has invested in the Indian markets. Real Estate Investment Trusts (REITs) have laid the path for investors to start their journey in this ever-growing market while collectively reaping the benefits of REITs with dividends and property ownership.
Let’s start with a brief explanation of REIT.
Table of Contents:
What is REIT?
A Real Estate Investment Trust (REIT) is a modern investment option for investors who want to invest in income-generating real estate properties. REITs include all residential and commercial properties, such as malls, office spaces, retail centers, hospitality, healthcare, etc.
The Securities Exchange Board of India introduced the REIT concept in 2007. In September 2014, a few guidelines were added and modified. All Trusts must follow these government guidelines, tax practices, and investment payouts.
Investors look to diversify their portfolios, add regular income via dividends, and add capital appreciation to property ownership.
Types of REITs
Several types of REITs are prevalent in India, making it easy for investors to start their investment journey in this lucrative market. Each offers unique characteristics from which investors can benefit.
- Equity REITs: The most commonly used Equity REITs use real estate properties as the primary source of investment. Rent income is then returned to investors as a dividend or quarterly payout.
- Mortgage REITs: This REIT investment uses a mortgage-style practice to generate income through interest earned on real estate market investments.
- Hybrid REITs: In this type of REIT, organizations use a combination of Equity and Mortgage REITs to diversify income potential further.
There are also private REITs that are not put up in stocks and offer limited regulations. Public REITs provide a listing in stock markets, while Public Non-Traded REITs are registered but not traded via public stock exchanges.
Why Invest in REIT?
REITs offer more secure and reliable options for investors to invest in the real estate market. Rather than directly investing in the property and going through the struggles of real estate transactions, REITs provide an organized approach to owning:
– shares,
-stocks,
-or a dividend amount in exchange for the investment.
Top 10 Benefits of Investing in REITs
As an investor, you must understand the comprehensive welfare of Real Estate Investment Trusts (REITs). Here are the top 10 main benefits of REIT investment.
1. Diversification
REITs represent a unique and suitable way to diversify your investment portfolio. These allow investors to own a property without owning a physical property while still generating regular income.
REITs must follow all the standard government practices, financial checks, and professional audits to be trusted organizations. Thus, REITs give investors a more systematic strategy for investing.
REITs invest in multiple property options with all residential and commercial buildings, so this diversification also reduces risk and market volatility.
2. Liquidity
Most REITs in India are listed on public stock exchanges. Thus, the ease of buying and selling their stocks enhances their liquidity. As an investor, you can check all their financial transactions, audits, and profit & loss statements to reap the benefits of REITs.
Compared with direct investment in properties, REITs are more reliable and stable options. And in case of market volatility, you can easily change portfolios to be on the safe side.
3. Regular Income Stream
Everyone dreams of building a stable and steady income option in their life. REITs give you the advantage of fulfilling this dream with minimum hassles of real-world struggles. REITs must follow the law to distribute 90% of their taxable income as dividends to shareholders.
While investing in stock markets and bank FDs are traditional long-term solutions, REITs offer a unique modern approach with Dividends and quarterly payouts to follow a more sophisticated approach.
With regular income streams and tax benefits, REITs have opened a new approach for modern investors.
4. Professional Management
REITs are run by a team of highly experienced professionals from the real estate industry only. These professionals understand the real estate market challenges with handling procedures, acquisition, management, leasing, and related operational hassles.
These professionals understand the market’s volatile nature and provide a more sophisticated approach to managing everyday struggles. So your investment is assured with the best professionals without any involvement.
REITs undergo all the necessary government regularity checks, adding an extra layer of security to investment and providing comprehensive professional management for investors.
5. Access to Commercial Real Estate
REITs allow an everyday investor to invest in commercial real estate properties like shopping malls, healthcare, and industry sectors. Thus, REITs expose a whole new investment opportunity in the market rather than the traditional methods.
So, investors are putting their hard-earned money into trending commercial real estate. These properties, such as malls, shops, gaming centers, and similar ideas, continuously generate income for your investment.
These REIT investment strategies are more beneficial for long-term benefits with higher returns than banks or any financial institutions.
6. Tax Benefits
REITs offer multiple tax benefits for investors. One of the main conditions for their eligibility is to distribute 90% of their taxable earnings to shareholders as a dividend payout, which allows them to receive a special tax exemption and avoid corporate tax.
So, as an investor, you can obtain higher dividends for your investment than with similar traditional options. You can connect with our Real Estate professionals to learn all about the tax benefits of investing in REITs.
7. Inflation Hedge
After-tax benefits, another essential benefit investors can take from REITs is to adjust for rents and lease rates in parallel with inflation. For instance, rents and lease rates will increase if inflation rises, thus leading to a suitable increase in the income of investors.
8. Transparency
SEBI regulates the REITs to publicly disclose their financial reports, statements, and taxation for complete transparency towards investors. Professional audits are also mandatory, thus keeping things open and public for investors to check as a future investment option.
9. Lower Entry Costs
REITs can also benefit from lowering entry costs to enhance their investment opportunities. Compared with direct property investment, these are significantly lower and provide a more stable income for your REIT investment.
As an investor, you can avoid all the struggles of real estate transactions while still owning a property share equal to the investment.
10. Potential for Capital Appreciation
When comparing it with long-term benefits, you can also adjust for improved Capital appreciation on investment in REITs.
As the real estate market grows, the value of investment also appreciates, offering more earning opportunities for investors.
Combined with regular income, Real Estate Investment Trusts(REITs) are more stable and futuristic options for investment.
Conclusion:
Real Estate is an evergreen industry in India with continuous growth in the last few decades. Investment opportunities by REITs allow investors to be part of this incredible journey and reap the benefits.
These REIT investment benefits provide an in-depth analysis for investors to grow their portfolios in real estate markets. REITs add stable income, tax advantage, and capital appreciation to their investment. At the same time, mitigating the market challenges and volatility risks that come with real estate investment for prosperous futuristic growth.
Omaxe represents one of the Top Real Estate Developers in India, with multiple commercial and residential properties in top-tier cities. You can connect with our real estate experts to learn about investment opportunities.
