Real Estate Investment Trust (REIT)
In this article, we will talk about Real Estate Investment Trust if you not know about Real Estate Investment Trust then this article gonna help you lot.
Real estate has become one of the greatest issues of financial speculation that Indians need to settle on. However, sadly till now no controller has been introduced connected with this. In such a circumstance, REIT will make a practical road for that multitude of financial backers who need to procure normal pay by putting resources into business land organizations.
Globally, REIT has a presence in 30 countries and accounts for a fifth of the total property market with assets of $1 trillion. This is creating a solid and regular source of income along with portfolio diversification. In the developed countries, where REIT has been operating for the last ten years, people have got a substantial return on their investments on the basis of long-term risk. REIT has given 10 per cent annual return in the last five years. It can be a good option for Indians.
REIT is a company that primarily owns and operates income generating real estate properties such as showrooms, shopping centers, offices, hotels and warehouses. _ 'Securities and Exchange Board of India' (SEBI) is its regulatory body so investors need not worry about its credibility. According to SEBI, REIT will be set up as a trust, with a trustee as well as functionaries performing different responsibilities as sponsor manager and principal valuer. The trustee will have to enroll in SEBI and after nomination she will raise money from investors by making her offers. The minimum value of the initial offer has been fixed at Rs 250 crore and as per SEBI norms, the value of the asset under REIT should not be less than Rs 500 crore.
REIT can be converted into commercial real estate assets directly or through SPV. (Special Purpose Vehicle) will be allowed to invest. The schemes that will be floated initially will be close-ended real estate investment schemes like closed-ended mutual funds, which will invest in property with the objective of giving profits to the shareholders. This profit accruing to the shareholders or investors will be deducted from the rental income (income in the form of rental) or profit on total capital.
REIT can accept investment from both domestic and foreign investors, but initially its units can be offered only to HNIs or entities, hence the minimum subscription size is proposed to be Rs 2 lakh and the unit size is Rs 1 lakh. As the market develops, it will be made available to all.
This can prove to be a good option for investors in the age group of 45-50 years, as it will give them tax relief on the one hand and on the other hand it will also create a regular source of income after retirement.
By keeping a small amount of real estate property as an investment, everyone can earn profit from it. The doors of REIT are open to people who do not own a plot of land or any other kind of real estate property.
It is a matter of certainty that its projects will be regulated by SEBI, but what will the returns be? What will be the criteria? What will be the liquidity? The answer is that instead of owning a plot of residential or commercial property, REIT will hold a variety of holdings and ensure that the finished property generates regular income; Thus, investors will be exposed to the least risk, as the returns will also be lower. But this does not mean that the N.A.V. There will be no liquidity.
REIT itself does not pay any tax, but the firms or companies from which it raises funds will have to pay the tax. Similarly, the investor will have to pay tax on the profit or income arising out of his investment in various schemes of REIT. Thus REIT will work in parallel with traditional real estate on the one hand and PPF on the other. And will also work in parallel with safe investment schemes like DAT funds. REIT prefers liquid investments over various residential or commercial properties. If half yearly NAV are available, they provide a good basis for price-exploration on the one hand and have relatively high liquidity on the other. If you are in the initial stage of a job or business, and can only invest a small amount of money in real estate, then you can start well from here; Later on, after accumulating a decent amount, you can invest in properties as per your choice or requirement, just like investing small amounts in gold funds and equity traded funds for later use of your own family. Gold can be collected.
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