Dec 2017

The Role of REIT in Indian Real Estate Market

The Role of REIT in Indian Real Estate Market Update

Past 2-3 years, there has been a dramatic change in Indian real estate market which has induced investors and home buyers to buy properties for the long term. In fact, government policies are designed to boost the funding in the sector. Though Indian real estate has been lucrative since ages, it wasn't accompanying full-fledge platform. However, with the introduction of Real Estate Investment Trusts (REIT), it will allow investors to invest safely. Under REITs, investors can invest with a small sum of Rs 2 lakhs. Approved by Securities and Exchange Board of India (SEBI), REIT would pool money from different investors across the country. The ultimate aim of getting funds from REIT is to invest in commercial properties to generate income.


Overview and Features:

Presently, the Indian real estate market size is in the top and is set to reach $180 billion by 2020. Moreover, eliminating the poorly regulated standards on construction further boosts in its growth. REIT was introduced by SEBI initially in 2008 but wasn't implemented. However, REIT was implemented in different nations in early years itself. So in the year 2013, SEBI took it seriously to push REIT in India. In the 2014 budget, amendments were passed to introduce it under Incomes Tax Act 1961.

The REITs can invest directly in Real Estate assets, Transferable Development Rights (TDS) or indirectly in all through Special Purpose Vehicle (SPV). Moreover, REIT needs to invest in at least two projects, but shouldn't invest in other REIT projects, vacant land and mortgages. In a broader sense, REITs allows the investor to invest in properties like offices, residential units, hotels, etc. REITs are managed by the team of marketing, rent collection, tenant management and facilities maintenance.

Benefits REITs:

  • Returns through Dividends:

Investors are offered with about 90 percent of dividends, which they can decide its use. If investors want to invest again, then they need to purchase more shares. REITs also offer an increased opportunity for dividends on rents.


  • Returns through Appreciation:

It is witnessed that, REITs have performed well in the long-term appreciation of commercial real estate. Short-term fluctuations in inflation and interest rates usually don't impact on commercial real estate and share price REIT.


  • Low Volatility and Low Correlation:

Generally, REIT shares price lower volatility. This is because the rental income and management expenses are predictable. The performance of REIT can be predicted by analysts and they can even accurate which can certainly affect the share price. Moreover, REIT carries low correlation to the performance of other asset classes.


  • Low Risk:

80% of assets will need to be invested into revenue-generating and completed projects. The rest 20% includes construction projects, equity shared of listed properties, mortgage-based securities driving 75% of income from government securities.


  • No more headaches on property management:

The best thing about REITs is it allows the investor to own commercial real estate. Moreover, the investor will also enjoy the benefit of getting guidance from property managers on making money from trust members.



According to the report commissioned by Cushman & Wakefield, commercial properties falling under REIT are between $43 billion and $54 billion. For many, investing on REIT is like investing on long-term profit. Having a profitable property is nothing less than having a gold that can seed out the good profit.

Updated: 12/19/2017 12:36:54 AM
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