Capital Wealth

Proper due diligence is a must before investing in any asset. We are now clear with the pros & cons and taxation of REITs . This last part will finish up all that is remaining for you to invest in an REIT. How to choose a good REIT – Choosing the right REIT is very crucial. An investor must do proper due diligence before investing his/her money. The following points will guide you in making an informed decision -  1. Management -  The investor should investigate the track record of managers of the trust to see whether they have any experience in managing any successful REITs, and if yes, what returns did the REIT give to its unitholders. You should also investigate the compensation given to the managers. If its performance based, chances are that they would be looking out for your interests by aiming to get the best possible returns in the prevailing market conditions. 2. Diversification -  The REIT should be properly diversified in its holding of real est...

The previous article dealt with structure of an REIT. Here, we will examine the pros and cons of investing in the units will help you make an informed decision and the taxation of income accrued from REIT will help you in your tax planning. How to invest in REITs – There are two ways by which an investor can invest his funds in a Real Estate Investment Trust – 1. Initial Public Offer (IPO) -   An IPO the process by which the trust offers its units to the public for the first time by listing on a stock exchange. An IPO has a price band and the units are to be purchased in lots. Eg – When the first REIT of India was listed on the stock exchange, the price band for 1 unit was Rs. 300/- and the minimum bidding was of 1 lot of 800 units and its multiples. That means the minimum amount required for investing was Rs. 2,40,000 (Rs. 300 * 800 units). 2. Secondary Market -  Once the trust has been registered on the stock exchange, its units are freely trade...

We have accumulated a through knowledge about an REIT, its types and a typical portfolio of an REIT . But we are still unaware about what qualifies as an REIT and what is its structure. This article will focus on bringing to light the eligibility and structure of the REIT. What qualifies as an REIT? A trust is classified as an REIT, when – 1. The  trust distributes 90% of its income in the form of dividend.   2. The  trust invests 80% of its capital in revenue generating real estate. 3. The  trust has 10% of its capital invested in under-construction real estate. 4. The  trust should have an asset base of Rs. 500 Crores. 5. Net Asset Value (NAV)  of the REIT are updated twice in a financial year. Structure of an REIT A Real Estate Investment Trusts is setup as a trust under the Indian Trust Act, 1882 . The REIT must be registered with the Securities and Exchange Board of India (SEBI). The trust is governed by SEBI under the...

In the previous article we introduced ourselves to REITs and the possibility of using them to diversify our investment portfolio. In this article, we will examine the different types of REITs and the portfolio of an REIT. Types of REITs – 1. Equity REITs -  This is the most common form of REIT. The trust owns income producing real estate and primarily earn revenue through rental income 2. Mortgage REITs – These are also known as mREITs. These trusts lend money to real estate owners and operators. The lending can be either directly – through loans and mortgages or indirectly – through mortgage backed securities (MBS).  mREITs primarily earn from the net interest margin (NIM) – the spread between the interest they earn through these mortgages and the cost of lending theses funds. They are potentially sensitive to changes in interest rates due to the mortgage-centric nature of these REITs. 3. Hybrid REITs – As the name suggests, Hybrid REITs are...

Real estate, for many, is being able to buy a property, rebuild it according to their own tastes and call it a home. Owning their own home is a dream come true for many families. But for some, it is much more than that. It is an alternate source of income, a path to early retirement and financial freedom. So, what really is real estate investing – In layman terms, real estate investing is “Buying a Property - Renting it Out - Enjoy the monthly flow of Rental income” OR “Buy a Property – Fix it – Sell it for a profit”. In all fairness, its not as easy as it sounds but it conveys the point. Going through all this requires a lot of time, effort and most importantly – CAPITAL. Unlike other sources of Investment like stocks, bonds or mutual funds, which can be purchased with minimal capital, investing in real estate requires a huge amount of capital (depending upon the property) and some financing as well. Frankly, not all of us can afford to go purchasing rental properties...