Home Articles Articles Everything You Must Know On REITsEverything You Must Know On REITs

Everything You Must Know On REITs

IndianMoney.com Research Team | Updated On Monday, April 23,2018, 12:52 PM
5.0 / 5 based on 1 User Reviews

Everything You Must Know On REITs

Real Estate Investment Trusts are popularly called REITs. REITs are similar to mutual funds and they are governed by the capital market regulator, Securities and Exchange Board of India (SEBI).  Unlike mutual funds, REITs do not invest in stocks or bonds. REITs invest in revenue generating commercial properties (real estate).

Want to know more on residential apartments and residential land? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.

 

Everything You Must Know On REITs

 

1. How do REITs work?

 

REITs collect money from you and other investors and invest the money in profitable real estate properties like offices, hotels, residential units, warehouses, shopping centers and so on.

Like other securities, REITs are also listed on a reputed stock exchange and investors can buy units in the trust.  REITs assets will be held with independent trustees on behalf of unit holders/investors.

 

2. What is the role of the trustee?

 

REIT trustees must follow certain rules and guidelines.  They should ensure compliance with applicable laws and protect the rights of unit holders.

 

3. Take a look at the objectives of REITs

 

The main objective of investing in REITs is to provide dividends to the investors, that are generated in the form of rental income and capital gains from the sale of real estate assets.

Usually, the trust distributes 90% of its income among investors through dividends.

 

4. Types of REITs

 

 

  • Equity REITs:

 

Equity REITs own large hotels, apartments, commercial buildings and retail stores. They are responsible for acquiring, managing, building, renovating and selling these properties.

The income earned by giving these buildings on lease and rental income will be paid to investors as dividends.

 

  • Mortgage REITs:

 

Mortgage REITs do not own the properties themselves. Instead, they lend the money to real estate owners and their operators. The revenue is generated in the form of interest paid by real estate owners on the mortgage loans. This income will be distributed to investors via dividends.

 

Keep your Financial Cognizance up to date with Wealth Doctor App.   

 

5. Where do REITs invest your money?

 

REITs invest at least 80% of your money in completed revenue generating commercial properties. The remaining 20% is invested in Commercial properties under development, equity shares that derive a minimum of 75% of income from Government securities and Money market instruments.

 

6. Tax on REITs

 

Dividends from REITs are not taxable in the hands of the company. Tax paid on other securities at the corporate level, could be as high as 35%. As REITs save 35% tax at the corporate level, shareholders will get extra dividends. Shareholders are required to pay 15% to 20% tax depending on the tax bracket.

 

SEE ALSO: Should You Buy Property Endorsed By Celebrities?
 
 

7. Advantages of REITs

 

 

1. Stable Income

 

The trust distributes 90% of the income among its investors through dividends. Dividend will be distributed twice a year.

 

2. Transparency

 

Investments in REIT are transparent as full valuations are disclosed on a yearly basis. Be Wise, Get Rich.

Did you find this article useful? You can Rate us
5.0 / 5 based on 1 User Reviews
Article Author

IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

/
Love Beyond Death Get It now!
 

How about our new look!

 
Great!
Mm.. Ok
Bad
 

Please select a category

Please write your feedback and suggestions