21 Jun '16
REITs are similar to mutual funds, whein investments of many individuals and institutions are collected to deploy the money in real estate assets. The Trusts generally own and operate income-producing real estate such as office, residential apartments, shopping centres, hotels and warehouses.The real estate however needs to be REIT compliant.
The minimum subscription size for units of a REIT will be Rs 2 lakh. This provides an opportunity for smaller investors who, due to the high-ticket sizes usually involved in this asset.class, can't consider real estate as an investment option. Unit holders, be they institutions or individuals, get share of profits from REITs in the form of dividend.
In contrast to the equity market, where the management has the right to decide dividend payout, at least 90 per cent of the generated profits need to be distributed as dividend in a REIT. This helps the investors who prefer regular income source with possibility of capital appreciation.
Blackstone, the US private equity (PE) giant, and Bengaluru-based RMZ Corp, a developer-investor, could be the first ones to hit the market to list their real estate investment trust (REIT), after the finance minister cleared the final roadblock on dividend distribution tax in such bodies.
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