Difference Between REITs Investments and Mutual Funds
See below for the Difference Between REITs Investments and Mutual Funds Latest 2024. Which is better, How to Invest in Mutual Funds and Details Here.
Investing today gives people a lot of choices so they can reach their different goals, like making money or getting rich. And one of these new ways to invest is in REITs. When looked at on a world scale, REITs are nothing new. But for Indian consumers, it is still a fairly new way to put their money to work. In India, REIT is still very new, but many people in the business world think it will continue to grow. See below for the Difference Between REITs Investments and Mutual Funds in detail.
Difference Between REITs Investments and Mutual Funds.
Real estate investment trusts (REITs) and infrastructure investment trusts (IIPs) are both types of investments. It can also put money into the loans that these infrastructure and real estate units use.
To put it simply, REITs are like mutual funds. REITs use the money that buyers like us put together to buy real estate instead of stocks and bonds.
HOW REIT IS BUILT?
Let’s say that Company A built a business center but now wants to leave it. There are many reasons why they might want to leave.
To do this, another company will set up a REIT trust, which will buy the complex with small amounts of money from people and businesses. One way to invest is through a trust or a Special Purpose Vehicle (SPV). When a REIT owns or plans to own at least a 50% stake in a company or limited liability partnership (LLP), the partnership is called an SPV. An SPV can only hold and develop land and do any other activities that come up naturally. They are not allowed to do anything else.
What it takes to be a REIT?
For a REIT to meet the 2019 SEBI standards, it must have the following traits:
- The REIT must have at least 500 crore worth of assets.
- At least half of the nominal value of the stock in that SPV should be owned by the REIT.
- It should give investors 90% of its net distributable cash flow in the form of interest or dividends.
- The REIT has to put 80% of the money it has invested in assets that can make money, like finished projects.
- India doesn’t let REITs invest in empty land or land used for farming.
Why REIT is better than standard real estate investments?
REITs are a cheap way to invest in real estate. Most traditional ways to invest in real estate need a lot of money up front.
Investing in real estate the old-fashioned way means filling out forms and visiting government buildings. REITs, on the other hand, make investing in real estate as simple as investing in stocks or mutual funds.
It could take months or even years to find a good buyer and sell a house. There is less risk of running out of money with REITs because you can quickly sell your units and get the money deposited into your bank account.
- Since REITs are regulated by SEBI, the capital market regulator, there aren’t many chances of scams.
- REITs are also open because they have to report their capital stock every year and every six months.
- Because REITs have to give owners 90% of their income as dividends, they pay out higher dividends.
How to put money into Indian REITs?
India has three REITs that are on the stock market: Embassy Business Park REIT, Mindspace Business Parks REIT, and Brookfield India REIT. In the next few years, there may be more REITs.
You can buy units in REITs just like you would buy regular stock. SEBI said that the lowest amount that can be invested in a REIT should be lowered to between 10 and 15 lakh rupees, and the trade lot should be changed to one unit. In the past, the least you could spend was Rs.50,000, and a trading lot on the secondary market was 200 units.
The best way to get into REIT is to buy in REIT mutual funds. You can now put your money into the Kotak International REIT fund and get the rewards of both Indian and foreign REITs.
Conclusion:
For investors who want to diversify their portfolios, REITs can be an alternative investment choice. Before putting money into a REIT, though, you should talk to your financial advisor because it is a bit more difficult than mutual funds or any other type of investment.
The only reason for this blog is to teach, so don’t take it as personal advice. There are market risks with mutual funds, so read all documents linked to the scheme carefully. This is the details about the Difference Between REITs Investments and Mutual Funds in brief.
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