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.
But how much money do you need to invest in REITs? What are the minimum investment requirements for REITs? How do they vary depending on the type and location of the REIT? In this article, we will answer these questions and provide a comprehensive guide on the minimum investment requirements for REITs.
Minimum Investment Requirements for Publicly-Traded REITs
Publicly-traded REITs are REITs that are listed and traded on a recognized stock exchange, such as the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE) in India, or the New York Stock Exchange (NYSE) or the Nasdaq in the US. Publicly-traded REITs are the most accessible and liquid type of REITs, as they can be bought and sold easily and quickly on the stock exchanges, and have to follow strict disclosure and reporting norms.
The minimum investment requirements for publicly-traded REITs depend on the price of the unit or share of the REIT, and the minimum trading lot or subscription amount prescribed by the stock exchange or the regulator. In India, the Securities and Exchange Board of India (SEBI) has recently reduced the minimum subscription amount for REITs from Rs. 50,000 to Rs. 10,000-15,000, and the minimum trading lot from Rs. 1 lakh to Rs. 50,0001. This means that you can start investing in REITs in India with as little as Rs. 10,000-15,000, plus any associated brokerage fees. However, some REITs may require a higher minimum investment in certain circumstances, such as when they offer a dividend reinvestment plan or a rights issue. For example, Embassy Office Parks REIT, which is the first and largest REIT in India, requires a minimum investment of Rs. 1,500 when purchasing shares through the company’s dividend reinvestment plan2.
In the US, the minimum investment requirements for publicly-traded REITs depend on the price of the share of the REIT, and the minimum trading lot or subscription amount prescribed by the stock exchange or the broker. Generally, you can start investing in REITs in the US with as little as the price of a single share, plus any associated brokerage fees. However, some REITs may require a higher minimum investment in certain circumstances, such as when they offer a dividend reinvestment plan or a rights issue. For example, Realty Income Corporation, which is one of the largest and most popular REITs in the US, requires a minimum investment of $250 or 10 shares when purchasing shares through the company’s dividend reinvestment plan3.
Minimum Investment Requirements for Non-Traded REITs
Non-traded REITs are REITs that are not listed or traded on any stock exchange, but are registered with SEBI in India, or the Securities and Exchange Commission (SEC) in the US. Non-traded REITs are less liquid and transparent than publicly-traded REITs, as they are not subject to market fluctuations and have limited information available to the investors. Non-traded REITs may also charge higher fees and commissions than publicly-traded REITs, and may have a longer lock-in period.
The minimum investment requirements for non-traded REITs are usually higher than those for publicly-traded REITs, as they are determined by the REIT itself, and may vary depending on the type and size of the REIT, and the target market and investors. According to the National Association of Real Estate Investment Trusts (Nareit), non-traded REITs typically require a minimum investment of $1,000 to $2,500 in the US4. However, some non-traded REITs may require a much higher minimum investment, such as $25,000 or $50,000, depending on the REIT. For example, Blackstone Real Estate Income Trust, which is one of the largest and most successful non-traded REITs in the US, requires a minimum investment of $2,500 for individual investors, and $5 million for institutional investors.
In India, non-traded REITs are not very common, as most REITs prefer to list on the stock exchanges and raise funds from the public. However, some non-traded REITs may exist, and may require a higher minimum investment than publicly-traded REITs, as they are determined by the REIT itself, and may vary depending on the type and size of the REIT, and the target market and investors. For example, Indiabulls Real Estate Fund, which is a private REIT offered to qualified institutional buyers, requires a minimum investment of Rs. 1 crore.
Minimum Investment Requirements for Private REITs
Private REITs are REITs that are neither listed nor registered with SEBI or the SEC, but are offered to a select group of investors, such as high-net-worth individuals, institutional investors, or family offices. Private REITs are the least liquid and transparent type of REITs, as they are not subject to any regulatory oversight and have no disclosure or reporting obligations. Private REITs may also have higher risks and lower returns than other types of REITs, and may have a longer lock-in period.
The minimum investment requirements for private REITs are usually the highest among all types of REITs, as they are determined by the REIT itself, and may vary depending on the type and size of the REIT, and the target market and investors. Generally, private REITs are only available to accredited investors, who are individuals with a net worth of at least $1 million, or an annual income of at least $200,000, or entities with assets of at least $5 million, in the US, or individuals with a net worth of at least Rs. 2 crore, or an annual income of at least Rs. 50 lakh, or entities with assets of at least Rs. 10 crore, in India. The minimum investment requirements for private REITs may range from $25,000 to $100,000 or more in the US, and from Rs. 25 lakh to Rs. 1 crore or more in India, depending on the REIT. For example, Kotak India Real Estate Fund, which is a private REIT offered to accredited investors, requires a minimum investment of Rs. 25 lakh.
Conclusion
REITs or Real Estate Investment Trusts are a unique and attractive way to invest in the real estate sector, without having to buy and manage physical properties. REITs have different types, based on the nature of their assets, the way they are traded, and the tax treatment they receive. Each type of REIT has its own minimum investment requirements, which depend on the price of the unit or share of the REIT, and the minimum trading lot or subscription amount prescribed by the stock exchange, the regulator, or the REIT itself. The minimum investment requirements for REITs may vary from as low as Rs. 10,000-15,000 for publicly-traded REITs in India, to as high as Rs. 1 crore or more for private REITs in India, depending on the REIT. By understanding the minimum investment requirements for REITs, you can choose the REIT that suits your budget and preferences.
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