Online property investment is a convenient and accessible way to invest in the real estate sector, without having to buy and manage physical properties. Online property investment can be done through various platforms and instruments, such as real estate crowdfunding, real estate mutual funds, real estate ETFs, and real estate investment trusts (REITs).

 

Among these options, REITs are one of the most popular and widely available online property investment instruments, especially in India. REITs 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 can you start online property investment through REITs? What are the benefits and risks of investing in REITs? How can you choose the best REITs for your portfolio? In this article, we will answer these questions and provide a comprehensive guide on online property investment through REITs.

 

How to Start Online Property Investment Through REITs?

 

If you are interested in online property investment through REITs, you can follow these steps:

 

• Do your research: Before investing in any REIT, you should do your research and analysis of the REIT’s portfolio, performance, financials, management, and prospects. You should also compare the REIT 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 REITs in India and abroad.
• Choose your type of REIT: You should choose the type of REIT that suits your risk appetite, investment objective, and preference. You can choose from different types of REITs, based on the nature of their assets, the way they are traded, and the tax treatment they receive. For example, you can choose from equity REITs, mortgage REITs, or hybrid REITs, and from publicly-traded REITs, non-traded REITs, or private REITs. You can also invest in REIT mutual funds or ETFs, which are funds that invest in a basket of REITs, and provide instant diversification and lower fees.
• 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 REITs 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 REITs: You can buy and sell the units or shares of the REITs 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 REITs, and decide when to buy or sell them, depending on your investment strategy and goals.

 

What are the Benefits of Online Property Investment Through REITs?

 

Online property investment through REITs has several benefits, such as:

 

• Income: REITs provide a regular and tax-free income stream for the investors, as they distribute most of their income as dividends. The dividends are also higher than the average yield of the Nifty 50 index (1.3%).
• Growth: REITs can also offer capital appreciation potential, as the value of the underlying properties may increase over time due to factors such as inflation, demand-supply dynamics, rental growth, etc. The unit price or share price of the REITs may also reflect the changes in the value of the properties.
• Diversification: REITs allow you to diversify your portfolio across different types of real estate assets, geographies, and tenants. You can also benefit from the professional management and expertise of the REITs in selecting and managing the properties.
• Liquidity: REITs are listed and traded on the stock exchanges, which means you can buy and sell them easily and quickly. Physical real estate, on the other hand, may take months or years to sell, depending on the market conditions and demand.
• Transparency: REITs are regulated by SEBI and 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 REITs online.

 

What are the Risks of Online Property Investment Through REITs?

 

Online property investment through REITs also involves some risks and challenges, such as:

 

• Market risk: REITs 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. REITs 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: REITs are subject to the changes in the rules and regulations governing the REITs, 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, which may affect their performance and returns.
• Operational risk: REITs may face operational risks such as fire, theft, damage, or litigation related to the properties they own or manage. REITs may also incur expenses for maintenance, renovation, or development of the properties, which may reduce their net income and cash flow.
• Liquidity risk: REITs 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. REITs may also trade at a discount or premium to their NAV, which may not reflect the true value of the underlying properties.

 

Conclusion

 

Online property investment through REITs is a convenient and accessible way to invest in the real estate sector, without having to buy and manage physical properties. REITs have a special structure, listing, investment, valuation, and distribution mechanism, which provide income, growth, diversification, liquidity, and transparency benefits for the investors. However, REITs also have some risks and challenges, such as market, regulatory, operational, and liquidity risks, which the investors should be aware of and evaluate before investing in REITs. By following this guide on online property investment through REITs, you can start investing in REITs and enjoy the benefits of the real estate sector.

 

Sources:

 

• Best-Performing REITs: How to Invest in Real Estate Investment Trusts – NerdWallet
• 5 Types of REITs and How to Invest in Them – Investopedia
• 4 Best Real Estate Crowdfunding Investment Platforms of January 2024 – NerdWallet
• How to Invest in REITs in Canada [2024] – Finbold
• Real Estate Investment Trusts (REITs) | Investor.gov

Top REIT Stocks in India: An Investor’s Perspective 1