What are REITs?
Real Estate Investment Trusts (REITs) are investment vehicles that pool money from multiple investors to invest in real estate, much like how mutual funds pool funds to invest in stocks. Rather than directly owning properties, investors in REITs become shareholders in a portfolio of real estate assets.
- Income Generation: REITs generate income primarily from rent payments and capital gains from property sales.
- Dividend Distribution: Investors receive profits in the form of dividends, proportional to the units they hold.
What are InVITs?
Infrastructure Investment Trusts (InVITs) offer a similar investment approach but focus on the infrastructure sector. Through InVITs, retail investors can now invest in large-scale infrastructure projects such as toll plazas, highways, power grids, and renewable energy projects.
- Income Generation: Investors earn dividends from the steady cash flow of infrastructure projects.
- Capital Appreciation: As the country’s economy grows, the value of these infrastructure assets tends to appreciate, benefiting long-term investors.
Regulation and Benefits of REITs and InVITs
- Regulated by SEBI: Both REITs and InVITs are governed by the Securities and Exchange Board of India (SEBI), ensuring transparency and investor protection.
- Diversification and Liquidity: REITs and InVITs provide exposure to diversified real estate and infrastructure portfolios. If listed, they offer liquidity like stocks, allowing easy buying and selling.
- No Hassles of Ownership: Investors avoid property management tasks, such as finding tenants or maintaining the property. Additionally, there are no property registration or documentation hassles.
- Low Investment Threshold: REITs and InVITs are affordable, and you can invest in as little as a single unit.
Risks to Consider
- Market Volatility: Like stocks, REITs and InVITs are subject to market fluctuations and changes in interest rates.
- Regulatory and Economic Risks: Changes in regulations or economic conditions could affect their performance.
- Investment Horizon: These are long-term investments, ideally with a horizon of five years or more. Investors with a shorter timeframe may consider other assets.
- Liquidity Risk (for Unlisted): Non-listed REITs and InVITs carry liquidity risks, as they are not traded on exchanges.
How to Invest in REITs and InVITs
- Listed REITs and InVITs: You can buy these like stocks through your broker or demat account.
- Prominent Listed REITs:
- Embassy Office Parks
- Mindspace Business Parks
- Brookfield India Real Estate Trust
- Nexus Select Trust
- Prominent Listed InVITs:
- PowerGrid Infrastructure Investment Trust (PGInVIT)
- IRB InvIT
- India Grid Trust
- National Highways Infra Trust
- IRB Infrastructure Trust
- Sustainable Energy Infra Trust
- Energy Infrastructure Trust
- Prominent Listed REITs:
- Unlisted REITs and InVITs: These are typically offered to high-net-worth individuals (HNIs) or institutional investors via private placements. These investments have high minimum investment requirements and come with liquidity and transparency risks.
