What is a REIT?

In the present scenario many new investors are taking place in the real estate market. Many people have the misconception that you can invest in real estate if you have a lot of money. Well this is not completely true, people with limited funds can also invest in the real estate market through REIT. Here I will explain what is REIT in detail.

• REIT stands for Real Estate Investment Trust. It is a company that owns, operates or finances. Over the properties which are mostly commercial.

The objective of REIT is to invest in real estate without physically buying the properties. REIT is just like mutual and this trust will issue units to the investors. These units can be explained as, you will receive a small portion from the investment made by the trust. The trusts of REIT are mostly the developer of commercial property under SEBI governance. The Developers keep the unit share so that they get the funds during the initial stage for development of a project.

Suppose you have purchased a unit in a commercial IT park under REIT.  After the development various companies set up their office in the IT ( Microsoft) and will pay rent for the office space in the IT park. The rental income paid by  Microsoft to the IT park trust and from that money the trust will pass the dividend to you as your share unit.

• In India REIT run in the country as a trust not as a company 

• If investing in  REIT then it should be registered with SEBI and trade on stock exchanges.

• REITs are not applicable on agricultural land.

• If vacant land is approved for a project, then investment can be done on it.

Real estate is booming and many people are going into the real estate business. If you are a newcomer in the real estate business or if you are interested in investing in the real estate market, then you should know what is a REIT, its meaning, and what are the benefits of the real estate investment trust.

The full form of REIT is Real Estate Investment Trust. 

Real Estate Investment Trust is a type of mutual fund in real estate and is a listed company that enables private investors to invest in the real estate market. REIT allows anyone to own or finance properties just like in mutual funds, where the shareholders enjoy the income generated through stocks. Real Estate Investment Trust is also the same as a person enjoys the benefits of investing in real real estate by receiving good returns in the form of rent from tenants.

• In 2014 SEBI approved a few plans for REIT which state that REIT will run in the country as a trust not as a company.

• REIT should be registered with SEBI and trade on stock exchanges.

• REITs cannot invest in vacant land or in agricultural land

• If vacant land is approved for a project, then investment can be done on it.

• REIT can be traded easily without a stock exchange.

• It is a low-cost investment you do not have to invest a high amount of money.

• You can enjoy tax exemptions with REIT. As an individual, you can save up to 90% of tax every year.

• A person can receive REIT information on REIT prices and trading, he/she can access them online during trading hours.

Hope you have got the idea of what is a REIT from this answer.