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What Are REITs? Features, Investments & Returns
Real Estate Investment Trusts (REITs) are businesses that own or finance income-producing real estate in a range of real estate sectors. Due to the mutual fund foundation of REITs, investors have a more liquid option for purchasing real estate. It is a kind of security that offers all investors, no matter how big or small, a source of consistent income, portfolio diversity, and long-term capital growth. REITs are publicly traded on the stock exchange as any other security.
These real estate companies must meet a variety of requirements in order to be eligible to become REITs. Offices, apartment buildings, warehouses, retail centres, healthcare facilities, data centres, cell towers, infrastructure, and hotels are just a few of the real estate property types that REITs invest in. The bulk of REITs offer investors a variety of benefits and are traded on significant stock exchanges.
Features
- There must be at least 100 shareholders or investors in each REIT, and no one can own more than 50% of the shares.
- A REIT must invest at least 75% of its assets in cash, treasuries, or real estate.
- Real estate investments must account for 75% of its gross revenue.
- REITs must pay shareholders dividends that are at least 90% of their taxable income.
- Since most REITs trade on public markets, they are simple to buy and sell, which helps to offset some of the traditional real estate disadvantages.
- In terms of performance, REITs provide steady cash flow and enticing risk-adjusted returns.
Investments & Types
There are total 5 types of REITs, which includes:
- Retail REITs - Invest in shopping malls and freestanding retail.
- Residential REITs - Buy and operate apartment buildings, gated communities, and other such housing establishments.
- Healthcare REITs - These REITs invest primarily in real estate for hospitals, health clinics, medical establishments, etc.
- Resort REITs - These REITs primarily invest in hotels, resorts, etc.
- Industrial REIT - These REITs own warehouses and other industrial space.
- Mortgage REITs - These REITs loan out money to buyers of real estate, and some may even buy out existing mortgages.
- Office REITs - These REITs focus on office properties such as offices, industrial estates, residential complexes, and hotels to earn rental income.
- Diversified REITs - These REITs own different types of properties.
Top 3 REITs In India & Their Returns
The top 3 REITs in India are Embassy Office Parks REITs, Mindspace Business Parks REITs, and Brookfield India Real Estate Trust. Here are the REITs' return/performance since their listing:
1. Embassy Office Parks REITs
The REIT last traded at Rs 341.12 on NSE. It gave 1.03% in the last 1 week, whereas, it has fallen 6.52% in the last 1 year. In the last 3 years, it has fallen by 18.73%. The REIT since its listing date, 1 April 2019, has given 8.41% positive returns.
2. Mindspace Business Parks REITs
The REIT's current market price is Rs 338.50 on NSE. It has fallen 1.09% in the last 1 week, 0.29% in 1 month and 5.5% in the last 3 months, respectively. It has fallen 3.18% in the last 1 year. The REIT since its listing date on 7 August 2020 has gained 11.46%.
3. Brookfield India Real Estate Trust
The last trade price of the REIT on NSE is Rs 289.70. It has fallen 3.23% in the last 1 week, whereases it moved up 1.95% in 1 month. In the last 1 year, it has fallen 2.64%. Since its listing, on 16 February 2021, it grew 7.72%.
