In recent years, Real Estate Investment Trusts (REITs) have gained significant popularity as an investment option in India. Introduced by the Securities and Exchange Board of India (SEBI) in 2014, REITs offer a distinctive opportunity for investors like you to venture into a diverse range of real estate assets without the burden of direct ownership or management.
This comprehensive all-in-one article will be about various types of REIT investments available in India and also provides insights into some of their unique features, benefits, and risks By exploring the world of REIT investments in India, you can make informed decisions and discover the potential rewards they hold for your investment journey.
What are REITs?
A Real Estate Investment Trust (REIT) is a professionally managed company that owns, operates, or finances income-generating real estate. REITs yield capital from various investors to invest in a portfolio of income-generating properties such as commercial buildings, office spaces, retail centers, warehouses, and more. These properties generate rental income, and a share portion of it is distributed between the REIT investors in the form of dividends.
Types of REIT Investments in India
1. Equity REITs
Equity REITs are the most common type of REITs. These REITs invest primarily in income-producing properties and generate revenue through rental income and capital appreciation. Equity REIT investments in India usually focus on commercial properties, including office spaces, shopping malls, and industrial complexes. The rental income generated by these properties forms the basis for dividend distributions to investors.
2. Mortgage REITs
These types of REITs are also called as M-REITs. These are different from equity REITs in their investment focus. They offer financing for the real estate sector by investing in mortgages and mortgage-backed securities rather than investing in properties. The gain arisen by mortgage reits comes primarily from the interest on these mortgage loans.
3. Hybrid REITs
Hybrid REITs combine elements of both equity REITs and mortgage REITs. These REITs invest in a mix of income-generating properties as well as mortgage securities. By doing so, they aim to balance the income potential from rental properties with the interest income from mortgages.
4. Retail REITs
Retail REITs focus on owning and operating income-generating retail properties such as shopping malls, retail outlets, and shopping complexes. They generate revenue through rental income from retailers and tenants. Retail REITs can be influenced by consumer trends, economic conditions, and competition from e-commerce, making thorough research crucial before investing in this sector.
5. Office REITs
Office REITs invest primarily in office spaces, including commercial buildings and business parks. The revenue for Office REITs comes from leasing office spaces to businesses and corporations. The demand for office spaces is closely linked to economic activity and business expansions, making the performance of Office REITs sensitive to economic fluctuations.
6. Residential REITs
Residential REITs focus on income-generating residential properties such as apartments, condos, and single-family homes. They generate revenue through rental income from tenants. Residential REITs may appeal to investors looking for stable income streams from a sector with relatively stable demand.
7. Industrial REITs
These Reits work on income-generating industrial properties such as distribution centers, logistics, and storage houses. As the e-commerce platform and growth of logistics sector increased, Industrial REITs have gained popularity from investors seeking exposure to the expanding warehousing and distribution industry.
8. Healthcare REITs
Healthcare REITs specialize in investing in medical facilities, hospitals, nursing homes, and assisted living centers. As the healthcare sector grows with an aging population, healthcare infrastructure demand is expected to rise, making Healthcare reit investments in india is an interesting investment option for the future.
Eligibility Criteria for REIT Investors
To do REIT investments in India, you as an investor must adhere to the following eligibility criteria:
- Minimum investment amount: As per SEBI regulations, the minimum investment in REIT india is usually INR 50,000. However, some REITs may have higher minimum investment thresholds.
- PAN (Permanent Account Number): Investors must have a valid PAN issued by the Income Tax Department of India.
- Demat Account: REIT units are held in electronic form, so investors must have a Demat account to buy and sell them on stock exchanges.
Top REITs in India
Here are the Top REITs in India for you :
- Embassy Office Parks REIT: One of the largest and most successful REITs in India, Embassy Office Parks REIT owns a diverse portfolio of high-quality commercial properties, including IT parks and office spaces, in key cities like Bengaluru, Pune, and Mumbai.
- Mindspace Business Parks REIT: Another prominent player in the Indian REIT market, Mindspace Business Parks REIT focuses on owning and operating Grade A office spaces in major tech-driven cities such as Mumbai, Pune, Hyderabad, and Chennai.
- Brookfield India Real Estate Trust: Managed by Brookfield Asset Management, this REIT owns a portfolio of commercial properties, including office spaces, in cities like Mumbai, Gurugram, and Kolkata, attracting both retail and institutional investors.
- Blackstone Real Estate Investment Trust: With a focus on income-generating office properties, Blackstone REIT has gained traction among investors for its reputed management and diversified real estate assets.
- Prestige Estates Projects Ltd. REIT: Launched by the Prestige Group, this REIT holds a mix of commercial and retail properties across various cities, offering investors an opportunity to benefit from the growth potential in different segments.
Embassy REIT is one of the leading and pioneering REIT investments in India. It was launched in March 2019 and made history by becoming the country’s first publicly listed REIT. The REIT is sponsored by Embassy Group, one of India’s leading property developers, and Blackstone Group, a global real estate investment firm.
It has played a significant role in shaping the Indian REIT market and it has been leading for others to follow. If you don’t know it has multipurpose features like premium commercial properties, strong tenant base, and stable financial performance. All these have made it a catchy investment option for those looking to participate in the potential growth of India’s commercial real estate. However, before any investment, investors should conduct proper research and seek professional guidance to set right their investment decisions with their financial goals and risk tolerance.
REIT investments in India have opened up new opportunities for investors to diversify their portfolios and gain exposure to the real estate sector without the burden of direct property ownership. As the real estate market in India continues to evolve, REIT investments in India are likely to become even more popular among both retail and institutional investors naturally.
However, you must know as an investor that assessing the risk tolerance carefully and executing due diligence on specific Reits before investing anywhere is of utmost priority. Remember, past performance is not indicative of future results, and it’s essential to seek advice from a financial advisor to align REIT investments in india with individual financial goals.
Founder of Sustvest
Hardik completed his B.Tech from BITS Pilani. Keeping the current global scenario, the growth of renewable energy in mind, and people looking for investment opportunities in mind he founded SustVest ( formerly, Solar Grid X ) in 2018. This venture led him to achieve the ‘Emerging Fintech Talent of the Year in MENA region ‘ in October 2019.