A REIT, or Real Estate Investment Trust, is a type of real estate Company modeled after mutual funds. REITs are collective investment schemes that invest in a portfolio of income generating real estate assets such as shopping malls, offices, hotels or serviced apartments, usually established with a view to generate income for unit holders. Assets of REITs are professionally managed and revenues generated from assets are normally distributed at regular intervals to unit holder. REITs were created by Congress in 1960 to give all Americans the opportunity to invest in income-producing real estate in a manner similar to investing in stocks and bonds through mutual funds. There are more than 200 REITs available on the major stock exchanges, including about 150 REITs on the New York Stock Exchange, and dozens more on the American Stock Exchange and NASDAQ market.
REITs generally fall into three broad categories:
- Equity REITs- Equity REITs invest in and own properties (thus responsible for the equity or value of their real estate assets). Their revenues come principally from their properties’ rents. Equity REITs tend to specialize in owning certain building types such as apartments, regional malls, office buildings or lodging facilities.
- Mortgage REITs- Mortgage REITs deal in investment and ownership of property mortgages. These REITs loan money for mortgages to owners of real estate, or purchase existing mortgages or mortgage-backed securities.
- Hybrid REITs- Hybrid REITs combine the investment strategies of equity REITs and mortgage REITs by investing in both properties and mortgages.
Apart from these there are other REITs as well like Retail REITs, Healthcare REITs, Office REITs and Residential REITs.
Will REITS be successful in India?
The statistics of the real estate market in India seem to indicate the success of REITS in India:
- Fourth largest sector in terms of FDI inflows and rapid urbanization bodes well for the sector.
- Indian construction market is expected to be the worlds third largest by 2020 and is expected to more than double to USD649.5 billion by 2020 from USD360 Billion in 2010 and the real estate sector is estimated to be worth USD180 Billion by 2020.
- The number of Indians living in urban areas will increase from the current 377 million to about 600 million by 2031.
- Real estate contributes about 5 percent to India’s GDP and the market size is expected to increase at CAGR of 11.2 per cent during FY 2008-2020
The writer is a student at SSCBS, DU. The views expressed are based upon the analysis and research that the writer did on the topic from various books, reports and web articles. The writer regularly writes for Corporate Monks as a research associate. The writer takes personal responsibility for the ownership of the content shared and incase some sources have not been given credit, you can directly mail the writer firstname.lastname@example.org