Know everything about the new investment vehicle REIT

If you want to know about relatively new asset REIT, than you are in the right place. Today we are going to discuss what is REIT, why this was invented and whether you should invest it or not. We will know everything about this in this discussion.

What is REIT

The full form of REIT is Real Estate Investment Trust. This act similarly like the mutual fund where we can invest according to our need. In this type of investment vehicle, money are poured into one place and then these money are invested in the real estate across the country.

Here also a fund manager works. He has mainly two objectives with the fund. He has to find some real estate from where not only capital appreciation occurs but also give regularly rental income. For the regulation of REIT, SEBI has decided that 80 percent of the money kept here should be invested in completed commercial real estate so that rental income come consistently.

Parts of REIT

In this case also three parts are there, first are sponsors who promote the REIT. Second is portfolio manager who decides where and to invest the money and lastly there was trustee, where it is ensured that all the decisions are taking on the favour of investors.

Advantages of REIT

Now let`s talk about the advantage of REIT. So first advantage of these funds are that, it is invested mainly on corporate estates from where a monthly rental income can generates. There is also the rule that 90 percent of the rental income should distribute among the investors. So you can earn handsome money regularly from this asset with the capital appreciation itself.

Second advantage is that you are investing in prime location of the country with very minimum money. One retail investor may not acquire the full real estate but he can definitely buy some stocks of the REIT. 

Third advantage is that the stocks are tradeable in stock market. You don’t need to hold the stock forever. Whenever you want to sell you can do it with some clicks which is very tough in case of real estate trading in field. 

Minimum Investment

Now let`s talk about the minimum investment. SEBI earlier decided that one had to invest at least 50 thousand rupees or 200 units of REIT. But recently SEBI make this lower amount so you can invest minimum 10 thousand rupees or a single unit to own the stock of REIT.

Final Thoughts

So what is our advise to retail investors. This REIT is no doubt a good investment vehicle where you can get good monthly income or dividend. It also diversify your portfolio which will help you to protect your wealth.

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It is also a good way to start invest in real estate. As it is very tough to invest directly in real estate at first., you can explore these options. The only drawback is that this concept is quite new in our country. Till now only 4-5 REIT are trading in the stock market. They did not have a long past track to judge their performance. You have to extra careful before buying the REIT as new policies also can come.