REITs or Real Estate Investment Trusts are companies that own, operate, or finance income-generating real estate assets, such as office spaces, malls, hotels, warehouses, etc. REITs offer investors a way to participate in the real estate market by buying units or shares of the REIT, similar to buying shares of a company. REITs distribute most of their income to the unit holders or shareholders as dividends, and also offer capital appreciation potential.

Best Mutual Funds for Investing in REITs

REIT mutual funds are funds that invest in a basket of REITs, and provide instant diversification and lower fees for the investors. REIT mutual funds can be a convenient and accessible way to invest in the real estate sector, without having to buy and manage physical properties. REIT mutual funds can also offer higher liquidity, income, and transparency than direct investment in REITs.

 

But what are the best mutual funds for investing in REITs in India? How can you choose the best mutual funds for your portfolio? What are the benefits and risks of investing in REIT mutual funds? In this article, we will answer these questions and provide a comprehensive guide on the best mutual funds for investing in REITs in India.

 

Best Mutual Funds for Investing in REITs in India

 

There are not many REIT mutual funds in India, as the REIT market is still in its nascent stage in the country. However, there are a few REIT mutual funds that provide investors with exposure to the domestic and international real estate markets. Here are some of the best mutual funds for investing in REITs in India:

 

• Kotak International REIT Fund of Funds: This is a fund of funds that invests in units of SMAM Asia REIT Sub Trust Fund, which is an international fund that invests in REITs and real estate securities in the Asia Pacific region, excluding Japan. The fund aims to provide long-term capital appreciation and income by investing in a diversified portfolio of REITs that own properties such as office, retail, residential, industrial, and hospitality. The fund has a minimum investment amount of Rs. 5,000, and an expense ratio of 0.50%. The fund has generated a return of 18.82% since its inception in December 2020¹.
• PGIM India Global Select Real Estate Securities Fund of Funds: This is a fund of funds that invests in units of PGIM Jennison Global Real Estate Securities Fund, which is an international fund that invests in equity securities of real estate and real estate-related companies across the world. The fund aims to provide long-term capital appreciation and income by investing in a diversified portfolio of REITs and real estate companies that own properties such as office, retail, residential, industrial, and hospitality. The fund has a minimum investment amount of Rs. 5,000, and an expense ratio of 0.50%. The fund has generated a return of 16.67% since its inception in December 2020².
• Mahindra Manulife Asia Pacific REITs Fund of Funds: This is a fund of funds that invests in units of Schroder Asian Asset Income Fund, which is an international fund that invests in REITs and real estate securities in the Asia Pacific region, excluding Japan. The fund aims to provide long-term capital appreciation and income by investing in a diversified portfolio of REITs that own properties such as office, retail, residential, industrial, and hospitality. The fund has a minimum investment amount of Rs. 1,000, and an expense ratio of 0.50%. The fund has generated a return of 14.39% since its inception in March 2021³.

 

Best Mutual Funds for Investing in REITs : How to Choose the Best Mutual Funds for Your Portfolio?

 

The best mutual funds for your portfolio will depend on your investment goals, risk tolerance, budget, and preference. Here are some tips on how to choose the best mutual funds for your portfolio:

Best Mutual Funds for Investing in REITs

 

• Consider your investment goals: What are you trying to achieve with your investment? Are you looking for income, growth, or both? How long do you plan to hold your investment? How much return do you expect from your investment? These questions can help you determine which mutual fund can best meet your investment goals.
• Consider your risk tolerance: How much risk are you willing to take with your investment? How comfortable are you with market fluctuations, currency risk, and operational risk? How much diversification do you need in your portfolio? These questions can help you assess your risk tolerance and choose the mutual fund that matches your risk profile.
• Consider your budget: How much money do you have to invest in REIT mutual funds? How much money can you afford to lose in case of a downturn? How much money do you need to cover the expenses and fees associated with your investment? These questions can help you evaluate your budget and choose the mutual fund that fits your financial situation.
• Consider your preference: How involved do you want to be with your investment? Do you prefer to invest in domestic or international REITs? Do you prefer to invest in a specific property sector, or to diversify across different sectors? Do you prefer to invest in active or passive REIT mutual funds? These questions can help you gauge your preference and choose the mutual fund that suits your personal style.

 

Best Mutual Funds for Investing in REITs : What are the Benefits and Risks of Investing in REIT Mutual Funds?

 

Investing in REIT mutual funds has several benefits and risks, such as: Best Mutual Funds for Investing in REITs

 

• Benefits: The benefits of investing in REIT mutual funds are:
  • Diversification: REIT mutual funds provide you with diversification across different REITs, property sectors, geographies, and tenants. You can also benefit from the professional management and expertise of the fund managers in selecting and managing the REITs.
  • Liquidity: REIT mutual funds offer higher liquidity than direct investment in REITs, as you can buy and sell the units of the REIT mutual funds easily and quickly on the mutual fund platforms. Direct investment in REITs, on the other hand, may have lower liquidity than other equity instruments, as the trading volume and demand for the units or shares of the REITs may vary depending on the market conditions and investor sentiment.
  • Income: REIT mutual funds provide a regular and tax-free income stream for the investors, as REITs distribute most of their income as dividends. The dividends are also higher than the average yield of the Nifty 50 index (1.3%).
  • Transparency: REIT mutual funds offer higher transparency than direct investment in REITs, as REIT mutual funds have to follow strict disclosure and reporting norms, which ensure fair and accurate information for the investors. You can also access the financial statements, annual reports, and NAV of the REIT mutual funds online.
• Risks: The risks of investing in REIT mutual funds are:
  • Market risk: REIT mutual funds are subject to the fluctuations of the real estate market, which may be affected by various factors such as economic conditions, interest rates, supply-demand dynamics, consumer preferences, competition, etc. REIT mutual funds may also face the risk of vacancy, default, or renegotiation of leases by the tenants, which may reduce the rental income and occupancy rate of the properties.
  • Regulatory risk: REIT mutual funds are subject to the changes in the rules and regulations governing the REITs and the REIT mutual funds, which may be imposed by SEBI or the government from time to time. For instance, SEBI may impose restrictions on the leverage, diversification, valuation, or distribution policies of the REITs and the REIT mutual funds, which may affect their performance and returns.
  • Operational risk: REIT mutual funds may involve operational risks such as fire, theft, damage, or litigation related to the properties owned or managed by the REITs. REIT mutual funds may also incur expenses for maintenance, renovation, or development of the properties, which may reduce their net income and cash flow.
  • Currency risk: REIT mutual funds that invest in international REITs may face currency risk, as the exchange rate fluctuations between the Indian rupee and the foreign currency may affect the value and returns of the REIT mutual funds.

 

Conclusion : Best Mutual Funds for Investing in REITs

 

REIT mutual funds are funds that invest in a basket of REITs, and provide instant diversification and lower fees for the investors. REIT mutual funds can be a convenient and accessible way to invest in the real estate sector, without having to buy and manage physical properties. REIT mutual funds can also offer higher liquidity, income, and transparency than direct investment in REITs. However, REIT mutual funds also have some risks and challenges, such as market, regulatory, operational, and currency risks, which the investors should be aware of and evaluate before investing in REIT mutual funds. By following this guide on the best mutual funds for investing in REITs in India, you can start investing in REIT mutual funds and enjoy the benefits of the real estate sector.

 

Sources: Best Mutual Funds for Investing in REITs

 Best Mutual Funds for Investing in REITs | Best Mutual Funds for Investing in REITs | Best Mutual Funds for Investing in REITs

• Kotak International REIT Fund of Funds
• PGIM India Global Select Real Estate Securities Fund of Funds
• Mahindra Manulife Asia Pacific REITs Fund of Funds
• What is a REIT? – Nareit

Best Mutual Funds for Investing in REITs

Top REIT Mutual Funds in India: Making Informed Investment Choices