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What is Real Estate Investment Trusts (REITs)?


Finance minister Arun Jaitley in the Union Budget 2016 has removed dividend distribution tax (DDT) which was applicable on Real Estate Investment Trusts (REITs).

After re-establishing and invigorating real estate of foreign nations, including the likes of the US, Japan, Korea and Singapore among others, REITs are set to get a go-ahead by the govt of India.

What is Real Estate Investment Trusts (REITs)?

So what actually is REIT or Real Estate Investment Trust?

It is no other than an investment option which can be taken hold by the general public and is in attempt to boost the development of the real estate sector in India with an aim to increase liquidity in the market.

The REIT is the one who is in possession and takes care or manages the developed property that earns income. Investors investing in the investment avenue get hold of units in the business that manages property producing income.

REITs from investors perspective

A better investment option for those who intend to take a stake in the real estate market without much hassle and via a regulated mechanism. Offering the main advantage or instead doing away with the otherwise hassle of making checks in respect of the property title and other regulatory approvals, such an investment avenue is backed by the asset and chances of you losing your money on the investment are negligible.

Boost for developers of real estate property

Likely to prove a boon for the real estate developers, the REITs may provide them a channel to commercialize their developed property. Also, through the liquidity offered, highly leveraged companies in the sector can deleverage themselves to an extent.

RBI a step ahead in allowing REIT

Showing favour to the proposed changes in the FEMA and FDI rules, RBI has moved a step ahead in giving a full-nod to the REIT in India. Seen as a means to attract foreign capital or foreign investments in the country, RBI is likely to give a go-ahead to REIT in India (a group or an entity managing real estate much like shareholders in a company.)

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