Investors are not attracted to investing in real estate investment trusts (REITs) at a time when returns on fixed income products are rising. In fact, three listed REITs (Embassy Office Parks, Mindspace Business Parks and Brookfield India) yield lower than their benchmark bonds. However, REITs are profitable in the long run and are expected to benefit from a significant increase in commercial property rentals. Additionally, when interest rates peak in the months ahead, REIT yields will rise, making them more attractive to retail investors.
These trusts own income-generating commercial properties in the country and may purchase units in these trusts. Investing in REITs is therefore an ideal way to diversify your portfolio beyond stocks, bonds and gold. They are suitable for those who want to put money into real estate assets primarily for investment purposes and have a holding period of at least three years.
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Investors can start investing in REIT with Rs 10,000 to Rs 15,000 and buy units from stock market through demat account. Perfect for those who don’t want to invest in real estate. Also, investors don’t have to do a lot of documentation. Investors, especially the wealthy, prefer his REITs, which are ready to sell on the secondary market.
Investors should pay attention to the dividend yield of the REIT they want to invest in. It shows the performance of the portfolio in the trust. In addition, it analyzes the outlook for portfolio revenue growth and commercial property rental income and occupancy rates in the Trust’s portfolio.
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With only three REITs currently listed, investors need to track results regularly to assess performance. Market regulators advise trusts to update their overall activity on a quarterly basis. Dividends from REITs are tax-free and unit appreciation is taxable like stocks. If the investor sells the unit within his one year period, he will have to pay short-term capital gains tax of 15%. If sold after one year, he is subject to 10% long-term capital on the amount of profit over Rs.100,000.