What makes the Indian REIT the preferred choice for investors?

With the COVID-19 pandemic hitting the office space segment, REITs remained a desirable investment destination, generating significant returns. Let’s analyze the reasons for this

3 bhk flat for rent in kharghar, at a time when there are so many questions about office space portfolios following the coronavirus pandemic that have forced companies to adopt the work from home (WFH) model, the success and success of Investor Appetite for Real Estate Investment Trusts (REITs), operating primarily in the office space segment in India, solves many problems.

What makes the Indian REIT the preferred choice for investors

The office segment is believed to be the last to recover after the coronavirus slowdown. So why are REITs so successful? The point is, for today’s retail investors, the stock market is the preferred choice and the safest stock options are the REIT. HNI, pension funds, sovereign wealth funds and institutional investors are clinging to REITs in search of profits, realizing that long-term office growth remains unchanged.

REIT in India: Quick Facts

Mindspace REIT surpassed subscriptions 12.96x during gloomy forecasts for offices in June 2020.

Two REITs listed in India, Embassy and Mindspace, are trading around 10-20% above list prices. This goes beyond recurring interest payments with a return of 6% to 7.5%, excluding tax returns.

REITs have also played a catalytic role in the evolution of the financial structure of India’s promoters. Of the informal finance structures, REITs are known for structured finance, in which global private equity players, mutual funds and insurance companies have shown interest, leading to its success.

How do REITs work and what are the benefits?

Because REITs own, manage or fund portfolios of income-generating office space in India, they raise capital from investors and thus allow you to generate dividends on real estate investments without having to buy or sell. manage the property themselves.

Recognizing that demand for office space will take a little longer as WFH is here to stay for a while, JC Sharma, VC and MD Sobha Limited estimate that several commercial spaces have remained empty since the COVID blockade. -nineteen. People are waiting to see the scenario unfold.

A REIT is always a good investment option because it can be traded on the stock exchange after listing, he said. “In the long term, REITs can offer better after-tax returns than tfixed income.

This makes it an attractive long-term investment option due to the stable and growing flow of dividends combined with the appreciation of the underlying asset. It is believed that in 2021 the real estate sector will attract more investors, ”says Sharma.

What makes the Indian REIT the preferred choice for investors

Apurva Gupta, Chief Marketing Officer, Rivali Park, CCI Projects, notes that while the global crisis may affect office REITs in the short to medium term, the long-term outlook remains positive. Investors should consider taking a long term look at desktop REITs.

There will be more direct pressure on operations and costs for businesses, but ultimately the impact on REIT offices will be short-lived and manageable. “The dividend distribution may not be the same as it used to be because given the current challenges and short-term costs, it is possible that REITs will postpone some of their payments to a later date.

They can offer shareholder options to participate in the distribution reinvestment plan to preserve short-term liquidity, ”Gupta says.

Why are REITs a good investment alternative?

  • Real estate and stock markets have become the preferred investment options for Indians since COVID-19.
  • Quality real estate stocks were among the first to experience green growth after the historic stock market crash of March 2020.
  • REITs, with their higher dividends and higher stock prices, are considered a safer bet than real estate stocks.
  • Since its inception, REITs have outperformed the BSE India Real Estate Index.
  • Since its IPO on April 1, 2019, the Embassy Office Park REIT has returned 14%, compared to -20% in the BSE real estate index (as of June 25, 2020).
  • REITs are traded on an exchange at a premium greater than 10% of the initial listing price.
  • According to Value Research, money market debt mutual funds generate about 6% pre-tax per year.

How REITs Can Help Investors and the Real Estate Industry

Simply put, a REIT is a new product on the market that offers greater security and a better return on investment. Analysts believe the REIT has the potential to improve security, further organizing the real estate industry.

Since REITs only own or operate profitable real estate, this concept can be of great benefit to real estate investors. A trust will allow investors to generate capital gains and income from the property without having to buy and own it.

Originally in India, REITs opened up the real estate industry to a wider range of investors. REITs also benefit developers because when REITs buy more properties, developers are more likely to sell more units.

During unforeseen scenarios, like the current pandemic, the sector tends to be affected, which reduces investments. In such a scenario, REITs can insulate the real estate market from risk, attracting more investment, regardless of economic conditions.

Finally, REITs encourage NRIs to invest in foreign real estate without requiring you to visit real estate to invest.

REITs are currently only distributed in the commercial space. People are still learning about how REITs work and how they are going to develop in the retail space. As the investor base grows in the Indian market, the introduction of REIT into the residential sector is also expected to take place.

 

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