Things to know about REIT funds while investing | Fusion - WeRIndia

Things to know about REIT funds while investing

Things to know about REIT funds while investing

REITs means Real Estate Investment Trusts. They enable people to invest in these funds to yield a good return. They are regulated by the Securities and Exchange Board of India (SEBI).

REITs operate real estate-related assets like apartments, resorts, buildings, shopping malls, hotels, warehouses etc.

Real estate companies develop properties to resell. But, REITs develop properties to operate them. Thus, they maintain these properties in their investment portfolio. People can invest in these funds and earn a share of the income generated through these properties.

There are different types of REITs mentioned below: Equity REITs, mortgage REITs, public non-listed REITs and private REITs.

Many REITs are registered with the SEC and traded publicly on the stock exchange. But, private REITs are exempt from registration with the SEC. They are not traded publicly.

There are many benefits of investing in REIT funds. At the same time, certain risks are also associated with them. Know about them before investing in REIT funds.

Here are the benefits of REIT funds:

  • The earnings from REIT funds are in the form of dividends. So, they assure a higher income. That means investing in REIT funds has high earning potential and high liquidity.
  • Many of these assets are long-term. So, they offer continuous income.
  • You can start investing with minimal investment. You can start investing even with ₹10,000.
  • They are tax efficient as the government gave them pass-through status.
  • Investing in REIT funds means an opportunity to buy a real estate property without any complications. In addition, they are cheaper.
  • They also help diversify your investment portfolio and the risk.

The following risks and challenges are associated with REIT funds:

  • They have high management fees as well as transaction fees.
  • They are vulnerable to changes in the real-estate sector. Hence, investors should carefully consider various factors like location, the real estate market, its trends over time, etc., before investing.
  • Though they are tax effective, shareholders have to pay taxes on the dividends. Besides, any applicable capital gains have to be paid by them.
  • Investors should be extra cautious while investing in REIT assets that are not registered with the SEC.
  • In India, real estate is regulated at the state level. There is no national policy for its regulation, which is a major challenge.

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