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.

 

India REIT Fund : REITs are a popular instrument globally, but they are relatively new in India. The first REIT in India was launched in 2019, and since then, the REIT market in India has grown steadily, attracting both domestic and foreign investors. However, the availability of REIT stocks in the Indian market is still limited, as there are only a few REITs listed on the stock exchanges, and the REITable stock in India is still under-penetrated.

 

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

 

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

 

What are India REIT Funds?

 

India REIT funds are fund that invest in a basket of REITs, either domestic or international, and provide exposure to the real estate sector. India REIT funds can be classified into two types:

 

• India REIT Fund of Funds: These are funds that invest in units of other REIT fund, which in turn invest in REITs. India REIT fund of funds can provide diversification across different REIT funds, geographies, and property sectors. India REIT fund of funds can also have lower fees and expenses than direct investment in REITs, as they can benefit from the economies of scale and the expertise of the underlying REIT fund managers. However, India REIT fund of funds may also have lower returns and higher risks than direct investment in REITs, as they are subject to the performance and the risks of the underlying REIT funds, as well as the currency risk and the regulatory risk of the foreign REIT markets.
• India REIT Index Funds or ETFs: These are funds that invest in REITs that are part of a REIT index, such as the Nifty Realty Index or the S&P Global REIT Index. India REIT index funds or ETFs can provide diversification across different REITs, geographies, and property sectors. India REIT index funds or ETFs can also have lower fees and expenses than direct investment in REITs, as they can benefit from the passive management and the low turnover of the REIT index. However, India REIT index funds or ETFs may also have lower returns and higher risks than direct investment in REITs, as they are subject to the performance and the risks of the REIT index, as well as the tracking error and the liquidity risk of the REIT index funds or ETFs.

 

How to Invest in India REIT Funds?

 

To invest in India REIT fund, you can follow these steps:

• Do your research: Before investing in any India REIT fund, you should do your research and analysis of the fund’s portfolio, performance, financials, management, and prospects. You should also compare the fund with its peers and benchmarks, and check its ratings and reviews from reliable sources. You can use the web search results from my predefined internal tool¹ to get some information about India REIT funds and REITs.
• Choose your type of India REIT fund: You should choose the type of India REIT fund that suits your risk appetite, investment objective, and preference. You can choose from India REIT fund of funds or India REIT index funds or ETFs, depending on the level of diversification, fees, returns, and risks that you are comfortable with.
• Open a demat and trading account: You need to open a demat and trading account with a broker or an online platform, which will enable you to buy and sell the units or shares of the India REIT funds on the stock exchanges. You should choose a broker or a platform that offers low brokerage charges, high security, and good customer service.
• Buy and sell the units or shares of the India REIT funds: You can buy and sell the units or shares of the India REIT funds through your broker or online platform, by placing your order and paying the required amount. You should monitor the price movements and the market trends of the India REIT funds, and decide when to buy or sell them, depending on your investment strategy and goals.

 

What are the Benefits and Risks of Investing in India REIT Funds?

 

Investing in India REIT fund*s has several benefits and risks, such as:

 

• Benefits: The benefits of investing in India REIT funds are:
  • Diversification: India REIT 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 or the REIT index in selecting and managing the REITs.
  • Liquidity: India REIT funds offer higher liquidity than direct investment in REITs, as you can buy and sell the units or shares of the India REIT funds easily and quickly on the stock exchanges. 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: India REIT 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: India REIT funds offer higher transparency than direct investment in REITs, as India REIT 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 India REIT funds online.
• Risks: The risks of investing in India REIT funds are:
  • Market risk: India REIT 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. India REIT 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: India REIT funds are subject to the changes in the rules and regulations governing the REITs and the India REIT 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 India REIT funds, which may affect their performance and returns.
  • Operational risk: India REIT funds may involve operational risks such as fire, theft, damage, or litigation related to the properties owned or managed by the REITs. India REIT funds may also incur expenses for maintenance, renovation, or development of the properties, which may reduce their net income and cash flow.
  • Currency risk: India REIT 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 India REIT fund.

 

Conclusion

 

India REIT fund are funds that invest in a basket of REITs, either domestic or international, and provide exposure to the real estate sector. India REIT funds can be a convenient and accessible way to invest in the real estate sector, without having to buy and manage physical properties. India REIT funds can also offer higher liquidity, income, and transparency than direct investment in REITs. However, India REIT fund 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 India REIT funds. By following this guide on India REIT funds, you can start investing in India REIT fund and enjoy the benefits of the real estate sector.

 

Sources:

 

• 3 Best REIT Mutual Funds in India (2023) – Should You Invest? – NAVI-pedia
• Which is the best REIT in India? » Capitalmind – Better Investing
• What are Real Estate Investment Trusts, Types & List of REITs – ET Money
• Real Estate Investment Trust: How REITs have performed in India in 2021 …
• List of Top 3 REIT Funds in India (2023) – Aayush Bhaskar

Unlocking Potential Understanding the Minimum Investment in REITs