Understanding Real Estate Investment Trusts

A Real Esstate Investment Trust are a special type of investment scheme that operates more like a mutual funds but invest in real estate properties for returns. REITs controls the possession and management of income generated by residential or commercial property, REITs are an effective way of raising capital and provide an easy exit rout to investors. REITs help you to gain better return on investment compared to the other asset class. It allows you to claim several tax benefits so that you can gain higher income from your real estate investment.

The creation of REITs is a game changer for the real estate market of India. Just as mutual funds do with equity and depth, REITs will pool money from investors and invest them in income generating rental asset offering them a way to earn maximum profit by investing in property. Based on the type of real estate investment REITs are categorized into different types like

Mortgage REITs

 
Mortgage REITs are the trust that provides loan to the property owner in return for a mortgage on property. Moreover, the trust also buy mortgage and mortgage backed securities, and get their proceeds from the interest collected on mortgage loans.

Hybrid REITs

These trusts generate their revenue from rent, like equity REITs, as well as interest on mortgages like mortgages REITs.

Retail REITs

 
Retail REITs are the investment trust that own and manage commercial ventures like industries and shopping malls. They earn their revenue by leasing out these properties to retail tenants.

Health Care REITs

For health care centers like hospitals, nursing home, retirement home there are many REITs investment trust that invest on these properties. The REIT lease properties are managed by third party manager who pay them fixed rent along with operational and maintenance cost.

Office REITs

 
The official buildings are leased out by office REITs generally for long run. A long term revenue are being generated from the rent paid by these offices.

How REITs  Benefits the Real Estate Market

REITs has opened options for non property owner to invest on property. The shares of REITs offers liquidity which means they can be sold or purchased easily. The REITs works as a public sector investments in real estate. For small scale investors REITs provide opportunity to invest in large scale commercial real estate. The REITs regulates the money that come from different investors and use it in a lucrative real estate deals. Further the profit earned by different ventures are distributed among the investors. REITs helps to improve transparency in property market as the information is frequently disclosed on average rent, tenant profile, renewal profile and occupancy level. Availability of such information helps to control the violation in real estate market. With the help of REITs trust government is pushing for private public partnership for the improvement of infrastructure sectors. Also number of developers are considering developing affordable housing and venture into the development of industrial park. These development will provide necessary trust to the real estate industry and in turn to the growth of REITs.