INSUBCONTINENT EXCLUSIVE:
REIT is an entity which pools in resources from investors and then collectively invests in real estate.Commercial real estate as an asset
Many of us aspire to own commercial properties in the most prestigious localities and rent them out.Real estate investment trusts or REITs
have made this fantasy come true for many investors.REIT is an entity which pools in resources from various investors and then collectively
behalf of investors.REITs allow you to invest smaller amount of your savings into real estate which otherwise would not have been
possible.All this is done in a hassle free and convenient way without you getting involved in the long process of owning a property.Simply
put, REITs are to real estate what mutual funds are to equity markets
They're publicly traded like common stocks on the stock exchanges.The first REIT in India was listed back in April 2019
So why are we talking about REITs now, after almost three years?Well, in the current market scenario when inflation in the US is at a 40
year high (stock markets don't like high inflation), REITs have emerged as a new investment avenue.It's increasingly getting difficult for
an investor to find out a high-yielding asset class to invest in
That's where REITs come in
They could inflation proof your portfolio.Many are calling it the investment theme for 2022 and rightly so.Let's understand why experts
But now, inflation is back big time
So, you need a hedge.While we have gold and other investment options in a rising inflationary environment, here's how investing in REITs
help beat inflation.Property prices and rental income tend to rise when inflation rises
In fact, someone who has purchased a property using a fixed rate of interest loan could benefit during high inflation
This supports REITs' dividend growth and provides a reliable stream of income even during inflation.REITs are required to distribute to unit
holders not less than 90% of its net distributable cash flows in each financial year
Portfolio diversificationWhen high risk assets like stocks are performing well, a low risk asset like gold typically won't
When stocks are down, gold is generally stable or up.In the same way, real estate is largely driven by almost completely distinct set of
factors than what drives stock prices.That is why you need REITs in your portfolio
It offers the advantage of diversifying your portfolio and participating in the property market
That too without the hassles and with a minimum investment.Budget 2022 already laid the ground work for a massive capex boom
The focus is clearly shifting to growth at the expense of inflation.REITs will help you cash in on the capex boom.Apart from this, the
demand for real estate is also picking up
A survey showed that around 75% wealthy people will look to buy luxury properties, worth more than Rs 50 m, over the next two years in big
cities as well as in holiday destinations.That's for wealthy people
But what about the affordable housing?Well, the growth in affordable housing over the next few years is likely to be strong as around 22% of
good for REITsInitially, REITs became very popular because of the dividend yield they offered.However, ever since the pandemic, the listed
REITs on Indian bourses started to broadly underperform the Sensex
This was because of the growing popularity of work from home
There was uncertainty about the future demand for office spaces.But now, companies have called their employees back to office and normalcy
This bodes well for REITs and make them an attractive asset class to invest in.An overview of listed REITs in IndiaIn India, there are
parks and four prime city centre office buildings with 33.6 million square feet (MSF) of completed leasable area.It also has an under
construction and development pipeline of 9 MSF.In addition to the offices, it also owns two operational hotels with 477 keys, an
under-construction hotel with 619 keys, and a100 MW solar park.The company is backed by Blackstone Group, which has been actively investing
in the Indian real estate market since 2010.For the quarter ended December 2021, Embassy REIT declared a payout of Rs 4.9 bn or Rs 5.20 per
For fiscal 2022, Embassy REIT has now cumulatively declared year to date (YTD) distributions of Rs 15.6 bn or Rs 16.50 per unit.In fiscal
2021, it had declared a cumulative distribution of Rs 21.48 per unit of Rs 18.4 bn in total.The quarter under review was a good one for
Embassy REIT where it saw rental collections of over 99%, similar to last year.The REIT's IPO price was Rs 300
Since its listing in early April 2019, the stock has risen 24% to Rs 388 as of Monday's close.For 2022, the company has upped its guidance
and will declare Rs 21.70 per unit despite the Omicron wave marginally affecting some segments.This would result in a dividend yield of 5.7%
on the current price.Another key metric which investors need to consider is the book value of the REIT
Like mutual funds declare their net asset value (NAV) daily, REITs disclose their NAVs semi-annually or annually.So it's important to
check whether the REIT is trading at a discount or at a premium to its book value.Embassy REIT is currently trading at a discount of 2% to
its book value of Rs 388.26 as on March 2021.#2 Mindspace Business Parks REITMindspace REIT was the second REIT to list on Indian exchanges
It is managed by the K Raheja Corp Investment Managers.In the most recent quarter, Mindspace Business Parks REIT leased over 1.8 m square
feet office spaces, taking its overall leasing to nearly 4 m square feet for the first nine months of the financial year.It declared
distributions of Rs 2.8 bn or Rs 4.64 per unit for the December 2021 quarter with most of it being tax-exempt
In the September 2021 quarter, it had declared a distribution of Rs 2.7 bn or Rs 4.60 per unit.In fiscal 2021, the cumulative distribution
to unit holders was 9.59 per unit.The Mindspace IPO offer price was at Rs 275 per unit
It has gained 19% since its listing in early August 2020
Its units currently trade at Rs 358.Mindspace REIT offers a dividend yield of 5.2% while it is currently trading at a premium of 4% to its
book value of Rs 345.2 as on March 2021.#3 Brookfield India REITThe last one to join the party was Brookfield India REIT.Brookfield India
Real Estate Trust REIT is an India-based commercial real estate vehicle
The investment trust's portfolio consists of campus-format office parks
Its commercial assets are located in Mumbai, Gurgaon, Noida, and Kolkata.For the quarter ended December 2021, Brookfield REIT declared Rs 5
per unit in dividend to unitholders on the back of strong leasing momentum
It leased 5.36 lakh square feet office space across its assets with additional expansion options of 2.91 lakh square feet during the
quarter.The recent payout takes the cumulative dividend distribution for fiscal 2022 to Rs 17 per unit.The units were offered at Rs 275 per
Currently, they trade at Rs 311.Out of the three, Brookfield REIT has the highest dividend yield at 6.5% and also the highest occupancy
rate.It is currently trading at a discount of 3% to its book value of Rs 317 as on March 2021.As can be seen, the listed REITs are offering
good dividend yields through quarterly distribution which cumulatively amount to more than 6% at their current prices.An important point to
That's why even in the pandemic, their collections were around 99%.According to Anarock, a leading real estate services company, leasing
activity has picked up pace and is already witnessing growth
now to take a close look at REITs and diversify your portfolio
But there are a few things to remember before you invest.The main motive of REITs is to generate income and not earn capital gains
REITs are to provide an income stream in the form of rents/interest and leave some scope for capital appreciation.So if you are investing in
REITs, you need to understand their income generation capacity for a given period
You'll have to check their cash flow stability.For instance, if a REIT doesn't see optimum occupancy post-pandemic or loses its negotiating
power with customers, then it would earn a lower distributable surplus.Now comes an important point: The tax on the dividend payouts
declared by REITs.The dividends earned from REITs are included in your total taxable income and taxed as per the slab applicable to you.But
that's not always the case.For instance, Mindspace REIT distributes over 90% of payouts in the form of tax-free dividends
The other two - Embassy and Brookfield are still working on improving these measures
Brookfield's latest payout of Rs 5 per unit only considered 34% of this to be tax-free.To conclude, REITs are catching up big time which
is proving to be good for the real estate sector.The performance of listed REITs has opened the door wide open for real estate companies to
come out with their REITs
Going forward, we may see more REITs to be launched in India.Developers such as Oberoi Realty, DLF, Prestige Estates, and Phoenix Mills, who
grade office space and boast of quality assets
So always stick to the highest rated REITs.As more REITs list over time, there will be more options available to investors
Investing!Disclaimer: This article is for information purposes only
been edited by TheIndianSubcontinent staff and is auto-generated from a syndicated feed.)
