The introduction of REIT will provide another class of assets for investors
REIT is a quite popular way of investing in real estate in developed markets.
REIT is a quite popular way of investing in real estate in developed markets. It has enabled people with low income also to invest in real estate and take advantage of the huge investment opportunity. Its arrival in India will help investors to invest in the same way as they do in mutual funds. Needless to say, the introduction of REIT will fuel the realty market like never before.
The introduction of REIT will provide another class of assets for investors. A well-diversified portfolio reduces risk and gives more choices to investors.
Today, the only way to invest in real estate through the markets is to invest in property development companies or through mutual funds that invest in such companies. However, many of these development companies are mired in court cases making investment uncertain. Moreover, huge debts on their balance sheets tend to repel investors.
REITs are a good source of income. As explained earlier, most investors receive a part of the rent or interest payment by borrowers collected by REIT as their returns. Hence it provides regular income which is beneficial for people looking for additional sources of income as well as people who are not earning a regular salary. Additionally a liberal tax regime on REIT will further help investors receive a larger return on their investment.
The Indian real estate market is marred by corruption, irregularities, and litigation. REITs will force companies be more transparent. It will also provide an incentive for good corporate governance and encourage others to follow. In almost all the cases, when left to market, the best managed and most transparent companies get the most investment. REIT will be no different.
(The writer is the CEO of BankBazaar.com)
( Source : dc )
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