2
2
REIT-Providentblog
Market trends Real Estate Tips and Advice

Demystifying Real Estate Investment Trust (REIT)

By on April 24, 2019

What are REITs?

If capital appreciation via real estate is your goal, then REITs are just your thing. Just like mutual funds invest in various securities like equity, debt etc; REITs invest in real estate securities but unlike mutual funds REITs are traded in the stock market. There are many investors amongst us, who would want to invest in the real estate sector in order to diversify our investments and also to gain profits; against buying one residential property and being married to it for life. Times are changing and so is the investment outlook. Regulated by the Securities and Exchange Board of India(SEBI), REITs invest in commercial real estate properties and investors can buy units of this fund via the stock market. The profits earned via rents and capital appreciation are then distributed to the investor in the form of dividends.

Need more clarity? Let us look at a hypothetical example. Assume that an REIT IPO has been launched and listed on both NSE and BSE. The units are priced at Rs 300 and the minimum application had to be of 700 units i.e. ~Rs 2.1 Lakh. There. You now have invested in real estate with a smaller sum of Rs 2 Lakh as compared to the Lakhs you’d have spent otherwise. Had you been investing in a stand-alone property even for the purpose of renting it out, could you have gained even a porch at Rs 2.1 lakh? Doubtful. So, just get a Demat account and get started!

REIT-Provident Housing Blog-Image
Dividends might be the most common way of distributing credits and as per the Income Tax Act, 1961, any form of earnings from REITs except interest and rentals shall be tax-free.

Advantages of REITs

  • Liquidity- REITs can be traded like any other mutual fund unit or stock, which is an immense enhancement from the liquidity offered by the traditional real estate purchases.
  • Affordability- REITs bring to table the most affordable way of investing in real estate with the lowest entry barrier and without the hassle of maintaining the property you buy.
  • Dividends- SEBI has made it clear that the REITs have to share 90% of any form of profit achieved via rents or capital appreciation with its investors at least twice a year. 
  • Diversification- REITs make the much sought-after investment diversification a reality and with much ease. It gives you a window to delve into a sector which otherwise would have been a bit expensive to start with.

Returns and Income Tax

Even though REITs are at an extremely nascent stage right now to be able to fairly gauge the returns, but it is speculated that a long-term return can be anywhere in the range of 8-15% once the REIT market has matured enough. However, REITs need to be looked at from a long-term investment standpoint only. Prices may fluctuate if the investment horizon is lower.

There are three ways, in which you may receive the proceeds from REITs- dividends, interest and rentals. Dividends might be the most common way of distributing credits and as per the Income Tax Act -1961, any form of earnings from REITs except interest and rentals shall be tax-free. For the latter, you shall be taxed as per the income tax slab. Similarly, the long term (>3 years) and short term (<3 years) capital gain taxes are applicable depending on the holding time of the units.

Final Word

If you feel wary of this form of investment, it is only valid because there is no history or trend line to assess. However, looking at the success of REITs overseas, we are only hopeful that it shall open doors of real estate to many new investors since it fights the biggest demons of this sector- affordability and illiquidity.

TAGS
RELATED POSTS

LEAVE A COMMENT

Instagram
  • Wondering what makes "Provident Housing" the hottest investment option? We have charted out the reasons for you!  Presenting Mega Online Home Fest! Book your dream home with savings up to ₹ 12 lacs*, cashback of ₹ 1 lac*, on-spot loan approval and much more!! Hurry, last few days left. 
𝗛𝗼𝘄 𝘁𝗼 𝗮𝘃𝗮𝗶𝗹 𝘁𝗵𝗲 𝗼𝗳𝗳𝗲𝗿? ✔ Visit the website ✔ Click on the project of your choice ✔ Click on the home booking engine to take a virtual tour of the property. ✔ Click on your preferred home from the available selection ✔ Book your home by making an online payment of just ₹ 1,00,000. ✔ Don't forget to apply your voucher code for cashback of ₹ 1,00,000
Book Now-  www.providenthousing.com/megaonlinehomefest/
#MegaOnlineHomeFest #BiggerAndBetter #BiggestOnlineHomeFest #ProvidentHousing
  • A great time to get great savings! Provident Housing's biggest online festival is here, Mega Online Home Fest! Savings up to ₹ 12 lacs* on premium homes, for cashback of ₹ 1 lac*, on-spot loan approval and much more!! Hurry, last few days left. 
𝗛𝗼𝘄 𝘁𝗼 𝗮𝘃𝗮𝗶𝗹 𝘁𝗵𝗲 𝗼𝗳𝗳𝗲𝗿? ✔ Visit the website ✔ Click on the project of your choice ✔ Click on the home booking engine to take a virtual tour of the property. ✔ Click on your preferred home from the available selection ✔ Book your home by making an online payment of just ₹ 1,00,000 ✔ Don't forget to apply your voucher code for cashback of ₹ 1,00,000
Book Now- link in the bio 
#GreatSavings #MegaOnlineHomeFest #BiggerAndBetter #BiggestOnlineHomeFest #ProvidentHousing
  • Get your dream home this festive season! Provident Housing presents Mega Online Home Fest with savings up to ₹ 12 lacs*, cashback of ₹ 1 lac*, on-spot loan approval and much more!! Hurry! 
𝗛𝗼𝘄 𝘁𝗼 𝗮𝘃𝗮𝗶𝗹 𝘁𝗵𝗲 𝗼𝗳𝗳𝗲𝗿? ✔ Visit the website ✔ Click on the project of your choice ✔ Click on the home booking engine to take a virtual tour of the property. ✔ Click on your preferred home from the available selection ✔ Book your home by making an online payment of just ₹ 1,00,000. ✔ Don't forget to apply your voucher code to get a cashback of ₹ 1,00,000  Book Now- www.providenthousing.com/megaonlinehomefest/ 
#DilMaangeMore #MegaOnlineHomeFest #BiggerAndBetter #BiggestOnlineHomeFest #ProvidentHousing
  • Provident Housing's Mega Online Home Fest is now live.  Savings up to ₹ 12 lacs*, cashback of ₹ 1 lac*, on-spot loan approval and much more! Just follow these simple instructions to participate in the biggest festival of the season and book your dream home now. 
𝗛𝗼𝘄 𝘁𝗼 𝗮𝘃𝗮𝗶𝗹 𝘁𝗵𝗲 𝗼𝗳𝗳𝗲𝗿? ✔ Visit the website
✔ Click on the project of your choice
✔ Click on the home booking engine to take a virtual tour of the property.
✔ Click on your preferred home from the available selection
✔ Book your home by making an online payment of just ₹ 1,00,000.
✔ Don't forget to apply your voucher code to get a cashback of ₹ 1,00,000
Book Now- link in the bio
#MegaOnlineHomeFest #BiggerAndBetter #BiggestOnlineHomeFest #ProvidentHousing

Follow Me!

Archives