Real Estate Investment Trust

About REIT:

• REITs are institutions that enable investments into the real estate sector by pooling small sums of money from multitude of individual investors for directly investing in real estate properties so as to return a portion of the income (after deducting expenditures) to unit holders of REITs, who pooled in the money.
• REITs are modelled on the lines of mutual funds and provide investors with an extremely liquid way to get a stake in real estate.

Benefits:

• It provides for regular income, portfolio diversification, and long-term capital appreciation for all types of investors; small or big.

Features of REITs:

• Like any other security, REITs can enlist themselves on a stock exchange.
• REIT can invest in commercial real estate assets, either directly or through Special Purpose Vehicle (SPVs) which invests more than 80% of its assets in properties.
• REIT’s were first introduced in India by Securities and Exchange Board of India (SEBI) in 2007.
• REIT companies listed on Indian stock exchanges are monitored and regulated by the SEBI.
• There are primarily two types of REITs – equity and mortgage.

PRELIMS QUESTION

Consider the following statements regarding Real Estate Investment Trusts:
1.REITs are institutions that can pool small sums of money from multitude of individual investors.
2.REITs can enlist themselves on a stock exchange.
Which among the above statements is/are correct?
(a)1 only 
(b)2 only 
(c)Both 1 and 2
(d)Neither 1 nor 2

Answer to Prelims Question