Affordable Real Estate Investment Opportunity for Common People
Real estate has long been a preferred investment choice for many Indians. However, owning a piece of commercial property like a shopping mall or office space usually requires crores of rupees, making it out of reach for the average person. But now, thanks to the concept of Real Estate Investment Trusts (REITs), even small investors can own a share of valuable real estate by investing as little as Rs 140. REITs have opened the doors for common people to participate in the booming real estate sector and earn regular rental income.
What is REIT and How Does It Work?
REITs function similarly to mutual funds but in the real estate sector. Just as a mutual fund pools money from various investors and puts it into different stocks, REITs gather money to invest in commercial properties like malls, offices, and shopping complexes. The rents collected from these properties are distributed to the investors after deducting certain operational costs.
REITs allow investors to earn regular rental income along with the potential for capital appreciation. According to SEBI regulations, REITs are required to distribute at least 90% of their rental earnings to the unit holders. This means investors receive a portion of the rental income based on their investment. The payouts are made at least every six months, though most REITs in India currently offer dividends or distributions every three months.
Investing in High-Value Properties for as Little as Rs 140
If you want to invest in a premium location like the Bandra Kurla Complex (BKC) in Mumbai, you’d typically need to spend crores. However, with REITs, you can indirectly invest in properties like BKC. By purchasing a unit of a REIT, you become a stakeholder in that property. The prices of these units are affordable, ranging between Rs 140 and Rs 385, allowing even small investors to participate in high-value commercial real estate.
For instance, Nexus Select Trust, one of the REITs listed on the stock exchange, was priced at Rs 139.86 per unit as of September 20, 2024. Other REITs like Embassy Office Parks, Mindspace Business Parks, and Brookfield India Real Estate Trust offer similar opportunities.
Two-Way Earnings: Rental Income and Capital Appreciation
One of the key advantages of investing in REITs is that investors can earn both rental income and benefit from capital appreciation. When you buy units of a REIT, you are entitled to a share of the rental income generated from the property portfolio. Additionally, as real estate prices rise, the value of the REIT units also tends to increase. This means investors can sell their units at a higher price in the future, leading to capital gains.
For example, if you purchase a REIT unit for Rs 100 today and the unit price rises to Rs 130 over time, you not only receive rental income but also earn Rs 30 per unit from the price appreciation.
A New Way of Investing in Indian Real Estate Since 2019
Although the REIT model has been prevalent in global markets for decades, it was introduced in India in 2019. Embassy Office Parks REIT was the first Indian REIT to be listed on the stock exchange in March 2019. Since then, the REIT market has grown with the addition of new players like Nexus Select Trust, which was listed in 2023.
As of September 2024, there are four major REITs available on the Indian stock market:
- Embassy Office Parks REIT – Last traded price: Rs 385.28
- Mindspace Business Parks REIT – Last traded price: Rs 349.54
- Brookfield India Real Estate Trust – Last traded price: Rs 275.35
- Nexus Select Trust – Last traded price: Rs 139.86
How to Invest in REITs
Investing in REITs is just as easy as buying shares on the stock market. You can purchase REIT units through any brokerage platform. Once you buy a unit, you become a part-owner of the property portfolio and are entitled to receive rental income, along with potential appreciation in the unit price.
The minimum investment required is the price of one unit, which can be as low as Rs 140. By purchasing a unit, you can indirectly own commercial properties worth crores and enjoy rental income without the hassle of managing the property yourself.
A Smart Investment Option for Small Investors
For small investors looking for a steady source of income and a way to benefit from rising real estate prices, REITs offer an attractive option. They provide access to high-value commercial properties with minimal investment and regular payouts. With REITs, even those with limited funds can participate in India’s booming real estate market.
Investing in REITs is a way to grow your money while earning consistent returns, all without the need to buy property outright. It’s a smart, accessible, and affordable way to tap into one of the most sought-after investment avenues in India.
