We are Wealth Clinic Team
Investing in REITs here in India gives investors of all generations, especially the young ones, a great opportunity to make their first investments, whether small or big. If you're someone who's new to this concept and wants to know how it works and if it's even worth investing in, we'll try to answer your queries in this blog:
In plain words, a REIT Fund is an investment instrument, like a mutual fund. It helps you to mix money from several investors (shareholders of units) to purchase and manage commercial properties. The process involves arranging the units in specific bonds that are then traded at stock markets, thereby providing investors the option of entering or exiting the market.
The general rule for REITs in India is that it requires a serious investment of at least 80% of the funds in completed projects to ensure regular dividend paying to the unit holder. This comes as a fantastic opportunity for investors without having to buy or own the property.
From a REIT perspective, transparency in pricing and low volatility are what distinguish REITs from other real estate investment vehicles due to the consistency of rental income that tends to eliminate the swings in pricing.
Also, a REIT ensures liquidity and availability of investment opportunities by offering easy entrance and exit for investors. The small investment amount in REITs is another advantage, allowing people of all income levels to invest in commercial real estate. In short, REITs can be a great deal to have in your portfolio that aims at secured returns with lower risks.
Investing in REITs (Real Estate Investment Trusts) in India also carries with it some inherent risks which you should know about. As a shareholder, you won't have the control over property, i.e., it will lie in the hands of the REIT manager who will make all the decisions in this regard.
Also, fluctuations in the market rates can be detrimental to the Net Asset Value (NAV) of the fund. Finally, being a newly arrived finance product in India, the track record of REITs is new, so REIT investment might not be suitable for all investors.
In India, REITs( Real Estate Investment Trusts) are taxed based on the income earned from the rental or lease of the underlying properties. Let's have a look at them:
Investing in REITs depends on your investment goals, risk tolerance, and overall financial situation. The control over the property, as well as the liquidity of REITs, is the two most important advantages of REITs compared to direct real estate investment. Their diversification, the fact that they are easy to enter into, stable dividends, and tax advantages make them efficient tools to allocate real estate portfolios - especially to retail investors.
To sum up, REITs provide an opportunity for real estate investments which are structured. They allow these investments to be transparent, liquid, and tax-effective. Investors ought to examine their asset allocation strategy and include REITs in their portfolios for both stability and diversification.
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