Real Estate Investment Vehicles or REITs are investment entities that pool funds from a number of investors and invest the proceeds to acquire commercial real estate properties that generate both rental income as well as appreciate in value over time.
The investors are assigned units in the REIT proportionate to the amount of capital invested by them.
REITs are similar to mutual funds in that they pool funds from a number of investors. However, the basic difference between a Mutual Fund and a REIT is in the fact that Mutual Funds invest the pool in corporate bonds and stocks as well as in Government debt, while a REIT would invest the pool to acquire commercial real estate.
In India a REIT is required to be listed in a stock exchange.
Real Estate Investment Trusts seek to enhance investor value by acquiring prime commercial real estate properties that generate regular lease rentals as well as have the potential to appreciate in value over time.
REITs are professionally managed by a team with expertise in real estate investments.
REITs provide, retail investors with a small capital outlay, a wonder opportunity to invest in high yielding prime commercial real estate (an investment avenue that would otherwise be inaccessible to them) and earn rental income and capital appreciation in proportion to the capital invested. Compared to residential properties, rental income generated by commercial properties tend to much higher – leading to a greater yield on investments.
REITs being listed in stock exchanges, provide retail investors the necessary liquidity to exit their investments at any time by selling their REIT units on the stock exchange.