“Embassy REITs CEO Aravind Maiya resigns following Sebi suspension directive”, reported Business standard. But, What are REITS & how different it is from other financial products ?

REITs (Real Estate Investment Trusts) are investment vehicles that own, operate, or finance income-generating real estate. They allow individuals to invest in real estate assets without directly owning physical properties. REITs pool funds from investors to buy and manage properties like shopping malls, office buildings, residential apartments, hotels, warehouses, and more.

REITs work similarly to mutual funds, but instead of investing in stocks or bonds, they invest in real estate properties or mortgages. Investors earn returns in the form of dividends (rental income) and potential capital appreciation of the properties.

Key Features of REITs:

1. Income Generation: REITs primarily generate income through rent or interest payments on financed properties.
2. Liquidity: Unlike traditional real estate investments, REITs are traded on stock exchanges, making them liquid.
3. Diversification: Investing in REITs allows diversification across different types of real estate assets.
4. Dividends: REITs are required by law to distribute a significant percentage (usually 90%) of their income as dividends to investors.
5. Regulated: In India, REITs are regulated by SEBI (Securities and Exchange Board of India), ensuring transparency and investor protection.

Types of REITs:

1. Equity REITs: Focus on owning and managing physical real estate properties. Income is earned through rents.
2. Mortgage REITs (mREITs): Invest in mortgages or mortgage-backed securities, earning income through interest.
3. Hybrid REITs: Combine features of both equity and mortgage REITs.

How Do REITs Work in India?

In India, REITs primarily invest in commercial real estate properties like office buildings, shopping malls, and warehouses. They collect rental income from tenants and distribute it to investors as dividends. Some popular REITs in India include:

• Embassy Office Parks REIT
• Mindspace Business Parks REIT
• Brookfield India Real Estate Trust

Who Should Invest in REITs?

• Investors looking for regular income.
• Those seeking exposure to real estate without buying physical property.
• Investors who want a liquid alternative to traditional real estate investments.
• People looking for low-risk, stable returns.

REITs are a great option for investors who want to benefit from the growth in the real estate sector without the need for large capital or direct property management. They combine the benefits of real estate investments with the flexibility and liquidity of stock market investments, making them an attractive choice for long-term wealth creation. Knowing their valuation after being listed on exchanges is tricky part so due diligence is must.