REIT - Real Estate Investment Trust

A REIT, is either a publicly listed closed or open-ended trust that allows investors to purchase units of a trust that holds primarily income producing real estate assets. The larger REITs are internally managed and will generally also have their own internal property management operation, which helps to lower the cost of operations. The smaller REITs, in order to remain competitive, have developed a shared management platform where the assets and strategic management are shared, usually with the sponsor, and the property management function is either internal or external to the REIT.

So, how does a REIT make its money? In several ways —

Buying and selling property, thus pocketing gains from any appreciation in value

Developing commercial space

Renting and leasing commercial space, and

Financing mortgages and loans on property.

Some of the key features of a REIT are:

High yield through regular distributions

Capital appreciation

Taxation

Distributable Income

Market Performance

Focused Asset Base

What to look for in a REIT

An experienced sponsor with a proven track record for the property type of the REIT;
• A focused portfolio
• Strong net operating income, cash flow and sustainable income growth (
• Limited debt
• Management that holds a significant investment in the REIT (10% to 20%) as this aligns
management's behaviour with investors' goals;
• Sufficient size to capture the brokerage community's interest, to ensure adequate liquidity and attract institutional investors.
• An infinite life (rather than a finite one), and the ability to use sales proceeds to finance accretive new property acquisitions, and not be required to distribute capital gains

Investing in Real Estate India.

Flying high on the wings of booming real estate, property in India has become a dream for every potential investor looking forward to dig profits. All are eyeing Indian property market for a wide variety of reasons:

• It’s ever growing economy which is on a continuous rise with 8.1 percent increase witnessed in the last financial year. The boom in economy increases purchasing power of its people and creates demand for real estate sector.

• India is going to produce an estimated 2 million new graduates from various Indian universities during this year, creating demand for 100 million square feet of office and industrial space.

• Presence of a large number of Fortune 500 and other reputed companies will attract more companies to initiate their operational bases in India thus creating more demand for corporate space.

• Real estate investments in India yield huge dividends. 70 percent of foreign investors in India are making profits and another 12 percent are breaking even.

• Apart from IT, ITES and Business Process Outsourcing (BPO) India has shown its expertise in sectors like auto-components, chemicals, apparels, pharmaceuticals and jewellery where it can match the best in the world. These positive attributes of India is definitely going to attract more foreign investors in the near future.

The relaxed FDI rules implemented by India last year has invited more foreign investors and real estate in India is seemingly the most lucrative ground at present. The revised investor friendly policies allowed foreigners to own property, and dropped the minimum size for housing estates built with foreign capital to 25 acres (10 hectares) from 100 acres (40 hectares). With this sudden change in investment policies, the overseas firms can now put up commercial buildings as long as the projects surpass 50,000 square meters (538,200 square feet) of floor space.

Indian real estate sector is on boom and this is the right time to invest in property in India to reap the highest rewards.