Buy a Real Estate Property at just Rs. 10,000? Wondering HOW?

Reading time - 3 mins

Hi Readers,

Good to see that the count of Covid - 19 cases in India are going down day by day.

 

Hope it ends soon!!! 🙏

Did you get shocked after seeing the tag line for today's blog - 

"Buy a Real Estate property at just Rs. 10,000"

Wondering How?

That's true and it has become possible in India to get a real estate property at price as low as Rs. 10,000.

The answer is through REITs and InvITs.

So, What is this REITs ?

REITs stand for Real Estate Investment Trusts.

A real estate investment trust (“REIT”) is a company that owns, operates or finances income-producing real estate. It is an investment opportunity, like a mutual fund, that makes it possible for every Indian to benefit from valuable real estate.

Basically in Hindi - 

ये एक तरह का रियल एस्टेट में निवेश करने का तरीका है। 

इसमें एक ट्रस्ट सेटअप किआ जाता है जो हमलोगो से पैसे लेकर और उसका pool बनाकर रियल एस्टेट में निवेश करता है।

 

जैसे की Mutual Fund हमारे पैसे को शेयर बाजार में लगता है, उसी तरह REITs हमारे पैसे को रियल एस्टेट बनाने या खरीदने में लगाता है।

और उससे आ रही Rental Income को हमे Dividend के रुप में बाट देता है। 

What assets do REITs own?

- REITs invest in a wide scope of real estate property which includes following types: 

• Offices
• Apartment Buildings
• Business Complex
• Residential Society
• Warehouses
• Retail Centers
• Cell Towers
• Hotels and etc.

but some also hold multiples types of properties in their portfolios.

What do REITs do to make money?

REITs is straightforward and understandable business model.

The major income comes from leasing out space that they have constructed/ owned/ leased and then collecting rent on its real estate, the company generates income which is then paid out to shareholders in the form of dividends. 

REITs must pay out at least 90 % of their taxable income to shareholders—and most pay out 100 %. In turn, shareholders pay the income taxes on those dividends.

For a company to qualify as a REIT, the following criteria must be satisfied:

1. 90% of the income must be distributed to the investors in the form of dividends
2. 80% of the investment must be made in properties that are capable of generating revenues
3. Only 10% of the total investment must be made in real estate under-construction properties
4. The company must have an asset base of at least Rs. 500 crores.

Benefits of buying REITs Funds?

- REITs have delivered competitive total returns, based on high, steady dividend income and long-term capital appreciation.

It also makes them an excellent portfolio diversifier that can help reduce overall portfolio risk and increase returns.

Major Benefit :- The stockholders of a REIT earn a share of the income produced – without actually having to go out and buy, manage or finance property.

How can I invest in REITs?

REITs are listed and traded on stock markets just like Exchange Traded Funds (ETFs), as a result, purchasing units on the stock market is the best way to invest. 

Thus, a Demat Account is mandatory for investing in REITs in India. 

You can get me a coffee if you open a demat account by my affiliate link - Open Demat A/C

Just like Exchange Traded Funds, the price of REITs units on stock markets changes. 

At present, you have 3 options in India to get a REITs included in your portfolio– 

1. Embassy Office Parks REIT
2. Mindspace Business Park REIT
3. Brookfield India Real Estate Trust.

What is InvIT and How is it different from REITs?

-An Infrastructure Investment Trust (InvITs) and REITs is alike, InvITs can be treated as the modified version of REITs designed to suit the specific circumstances of the infrastructure sector.

Recently, state-owned PowerGrid Corp of India Ltd listed on stock exchange, the first Infrastructure Investment Trusts (InvITs) ever by a PSU.

What is the current scenario regarding these instruments in India?

In India, the share of REITs market may grow to $22-40 billion over next few years.

Bengaluru is identified as India’s largest source for potential assets available for securitisation, accounting for 31% or 88 million sq ft of REIT worthy asset, valued at $11.16 billion (Rs 81,468 crore).

Globally, the share of REITs in the overall real estate market-cap is quite significant. In 2019, US REITs market-cap was 96 per cent of the total real estate market-cap. in Singapore, Japan and Malaysia, it was at 55%, 51% and 42% respectively. 

SEBI – the governing body for REIT – has already come out with a series of amendments favouring the investor community last year. 

Further to strengthen investor interest in REITs, the Union Budget 2021-2022 announced further measures to ease financial access by enabling FPIs to invest in debt instruments of REITs, and separately providing tax reliefs by exempting TDS on dividends paid to REITs. Attractive tax structures, relaxing of norms for sponsors etc. aim to make Indian REITs more attractive to global equity investors and domestic institutional and retail investors.

Hope you get handful insights about REITs and InvITs the and it's benefits.

(I can officially give advices on Investments as I hold a certificate from SEBI for Investment Advisor - L1)

Hope you all like this blog !

Please let me know in the comments if you have some query regarding the discussion. 

Also, if you are interested to get more such blogs on topics related to Money and Finance, please let me know in the comments. 

Enjoy reading!

Signing off.....

Ayush Garg

FinDost - A simple way to understand money!

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