REIT

Full form: Real Estate Investment Trust

Investments

A REIT is a company that owns and operates income-producing real estate (offices, malls, warehouses) and distributes 90% of net income to unit holders. Listed on stock exchanges, REITs let retail investors own commercial real estate with Rs 10,000-15,000 minimum investment.

In detail

Indian REITs as of 2024:nEmbassy Office Parks REIT: 45 million sq ft office space, distributed yield ~6-7%nMindspace Business Parks REIT: Hyderabad/Pune/Mumbai/Chennai officesnBrookfield India REIT: premium office assetsnNexus Select Trust REIT (Malls): retail real estatennDistribution components: interest, dividends, and return of capital (taxation varies)nTypical total return: 8-12% annualised (yield + price appreciation)nMinimum investment: approximately Rs 10,000-15,000 per lotnDemat account required

Formula

REIT Distribution Yield = Annual Distribution per Unit / Current Unit Price x 100nNAV per unit = Net Asset Value of all properties / Total units

Real-life example

🇮🇳 India example

Priya buys 10 lots of Embassy REIT (Rs 360/unit, lot size 1 unit). Investment: Rs 3,600. Gets quarterly distribution of approximately Rs 6/unit = Rs 60/quarter = Rs 240/year. Plus potential unit price appreciation. Total return approximately 8-10%/year with quarterly income -- better than FD, similar risk to real estate with much higher liquidity.

Frequently asked questions

REITs vs direct property -- which is better? ▼

REITs for most investors: better liquidity (sell anytime vs months for property), lower entry (Rs 10K vs Rs 50L), diversified across many buildings, professional management, no maintenance headache. Direct property: potential for higher appreciation in specific locations, home loan tax benefits, physical ownership satisfaction. REITs are clearly better for pure investment returns without the illiquidity.