Invest in real estate with as low as Rs 10,000; know what are REITs and InvITs

• Follow

You can now start investing in real estate with as low as Rs 10,000, as the Securities Exchange Board of India (SEBI) has amended the Real Estate Investment Trusts (REITs) Regulations, and Infrastructure Investment Trusts (InvITs) Regulations, 2014. According to new rules trading can be done in a lot of one unit with a minimum application value of Rs 10,000 and Rs 15,000 in the case of REITs and InvITs. The reduction in lot size brings them in line with the equity markets.

Currently, the minimum investment amount in the case of REITs is Rs50,000 and for InVITs it is Rs 1 lakh. Earlier the minimum investment limit for REITs was Rs 2 lakh which was brought down to Rs 50,000. REITs were first introduced in India in 2007.

Michael Holland, Chief Executive Officer of Embassy REIT said,  “We commend this proactive initiative by the regulator to reduce the trading lots of both REITs and InvITs. Embassy REIT’s listing in 2019, coupled with our strong and resilient performance over the 8 quarters since then, has paved the way for Indian REITs to evolve a mainstream asset class. With approximately $2 billion of primary REIT equity having listed in India in the last two years, leading global and domestic asset managers and growing numbers of retail holders now form the foundation of REIT unitholder registers. The reduction in lot size will increase liquidity for the entire REIT market, enable REITs to be included into benchmark domestic indices and allow greater participation from newer pools of institutional and retail investors.”

What is Real Estate Investment Trust (REIT)?

Just like a mutual fund, REIT allows you to invest in the units of real estate assets without owning the physical property. The company pools the money from investors and then invests in real estate on their behalf. In return, investors get a certain return as well as capital appreciation on their investments. Most importantly, REITs can list themselves on a stock exchange.

Basically, REITs are of three types: Equity REITs which own and operate properties. Second is mortgage REITs which invest in mortgages or mortgage-backed securities earning income from investments on their income. The third is Hybrid REITs which are a combination of Equity and Mortgage REITs.

What is Infrastructure Investment Trust (InvIT)

InvITs allow direct investment route into infrastructure projects. The objective of InvITs is to promote the infrastructure sector by encouraging more individuals and institutions to invest in it. The cash flow which is generated from InvIT is distributed among investors as dividend income. InvITs helps infrastructure companies in repaying their debt. Just like REIT, InvITs also get listed on the exchange.

The important point to note is SEBI does not allow guaranteed returns. It is always advisable to sit across your financial advisors before investing in REITs or InvITs.