REITs Compare

Additional Useful Information

• An investor can buy “Units” of REITs. These units can be purchased at a price which is called the “Net Asset Value or NAV”. The NAV of these funds keeps changing daily depending upon the changes in the stock prices of the companies that are held by them.

• The investor can sell these units anytime at the NAV price prevailing on the day of the sale.

• Total Purchase Amount	=	Number of Units X NAV as on the day of purchase
  Total Sale Amount	=	Number of Units X NAV as on the day of sale
  Total Gain	=	Total Sale Amount – Total Purchase Amount

• In comparison to other real estate transactions that require a lot of time to execute due to up front capital as well as heavy compliance, REIT transactions don't require much time because they don't require significant upfront capital or compliance. This applies to both the buying and selling process.

• REITs are managed by professionals who have expertise in their respective fields. This makes the due diligence process much easier for investors as compared to when investors go out and buy individual real estate properties. However, REITs do charge management fees for these services.

• There are several types of REITs including equity REITs, mortgage REITs, hybrid REITs, etc.

• Most people who invest in REITs do it for the purpose of having some exposure to real estate without having to take the burden of investing and managing individual real estate properties.

Returns *

• REITs do not guarantee any returns. However, the probability of negative returns are medium.

• Real Estate investments have relatively lower returns as compared to other investment options such as debt and equity.

• Overall, the returns on REIT investments can vary depending on the performance of the underlying real estate properties and market conditions.

Risk Level

• REITs are low to medium risk investments.

• Real estate investments come with risks such as interest rate risk, tenant risk, operational risk including maintenance and repair expenses, vacancy rates, and lease renewals. All these risks apply to REITs too.

• Market related risks also apply to REITs since their price fluctuates as per the demand and supply of that particular REIT in the market.

• REITs investments come with risks such as poor location risk, failure to pay rent by the tenant, and other issues.

• It is always worth doing thorough due diligence on an individual property under consideration. Every property comes with its own unique risks.

• Since REITs are diversified, they are less risky as compared to investing in individual real estate.

• Since SEBI (Securities and Exchange Board) regulates REITs, there are lesser chances of fraud.

• It is always worth doing thorough due diligence on the REIT under consideration.

Liquidity

• REITs are relatively liquid as compared to other real estate investments.

• The liquidity risk of REITs is much lower than individual real estate investments.

• Investors can decide to sell their investments at any given time, but there is no guarantee of a sale.

• REITs investments are relatively illiquid as compared to debt and equity investments.

Interesting Facts

• REITs must distribute at least 90% of their taxable income to shareholders in the form of dividends.

• 80% of the investment should be allocated to income generating property, 20% can be invested in other instruments and only 10% of the investment amount can be invested in under-construction properties.

• Only Commercial Real Estate and Office properties can be used for investments.

• REITs must have an asset base of minimum ₹500 Crores to qualify as REITs.

• REITs can be an effective hedge against inflation. This means that in an inflationary environment, as prices rise all around, real estate prices also generally increase in line with inflation. Since REITs consist of a diversified base of real estate assets, they too provide a good hedge against inflation.

• Real Estate investments have a low correlation with equity and debt investments. This is why it is a good investment option for diversification.

Tax Implications

• Earnings received from REITs are taxable.

• When investors sell their REIT holdings, the difference between the Sale Amount and Purchase Amount is typically called “Capital Gain” or “Capital Loss” (if sale amount is lesser than the purchase amount).

• The tax that the investor must pay on Capital Gain is –
• Situation 1 - If investors sell within 1 years of buying, then they would need to pay Short-Term Capital Gains Tax. In this, the ‘capital gain’ is taxed at 20%.
• Situation 2 - If investors sell after 1 year of holding the REIT, they will have to pay Long Term Capital Gains Tax. In this, the ‘capital gain’ is taxed at 12.5%. However, this 12.5% is only applicable on capital gains that exceed ₹1,25,000.

• There is no tax in case of “Capital Loss”.

• Any interest/dividend income that investors receive from REITs is added to their taxable income and they need to pay tax according to their tax slab.

Where To Invest

• Brookfield REIT Share Price Today - Brookfield REIT Ltd Stock Price Live NSE/BSE (groww.in)

• https://stocks.zerodha.com/stocks/brookfield-india-real-estate-trust-BIRE