Monday, November 4, 2013

Dreamz Review - Real Estate Investment Trusts (REITs) and Its Benefits

The India’s capital market regulator, the Securities and Exchange Board of India will permit Real Estate Investment Trusts (REITs) in India.

The Real Estate Investment Trusts (REITs) is an investment fund that invests in real estate.  REIT is a company that owns many types of commercial real estate, including office, apartment buildings, shopping centers, hotels, warehouses, hospitals, and even timberlands and some REITs also finances real estate.

The Real Estate Investment Trusts just acts like a mutual fund, which lets you to invest indirectly in commercial or large properties and where an expert fund manager manages a pool of money and he buys or sells properties behalf of you and you get the benefit of the market movement in prices through your investment on the unit.

After five years, the Securities and Exchange Board of India released guidelines that were drawn for REITs.  The regulator has invited the authorities for feedback on REITs, after which the regulations will be validated and launched.

The REITs provide investors an opportunity to invest in large-scale and diversified real estate, which will earn returns the same way as other asset classes.
A REIT acts like a mutual fund, where to invest in a stock you need not to own a stock, in the same way, to invest in REITs you need not to own a property.

A REIT is a platform for investment in property that allows to invest in hospitals office, complex, and malls etc., which would be difficult for an ordinary investor.
Due to the variations in the value of the properties in the country, the Securities and Exchange Board of India was doubtful to launch REIT’s in India in 2008.

The regulator has now suggested a complete evaluation, which includes a physical scrutiny of the properties once in a year and will be updated every six-months, the declaration of net asset value of REIT units at least twice a year to ensure transparency that will evaluate the fundamental assets of REITs appropriately.

Investors will get regular income by investing in REITs and for developers they will act as sponsors as well and in case if they want to go out, they can opt for either as a developers or a private equity fund that will enable developers to invest in other projects as well.
It is also expected that the REITs will fetch in accountability and transparency in the realty sector, which now is complicated.

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