Real estate is one of the most attractive and rewarding investment options in India, as it offers both capital appreciation and rental income. However, investing in real estate also involves high costs, risks, and hassles, such as finding suitable properties, arranging funds, managing tenants, maintaining properties, paying taxes, etc. Moreover, the real estate market is often affected by various factors, such as demand and supply, economic conditions, interest rates, regulations, etc., which can impact the returns and liquidity of the investment.

 

This is where REIT mutual funds in India come in handy. REIT stands for Real Estate Investment Trust, which is a company that owns, operates, or finances income-generating real estate assets. REIT mutual funds in India are funds that invest in the shares of REITs, either directly or through other funds. By investing in REIT mutual funds in India, investors can get exposure to the real estate sector, without having to buy or manage any property themselves. REIT mutual funds in India offer several benefits to investors, such as:

 

• Regular income: REITs are required to distribute at least 90% of their taxable income as dividends to their shareholders. This means that investors can receive a steady stream of income from their REIT mutual funds in India, which can be higher than the interest income from fixed deposits or bonds.
• Capital appreciation: REIT mutual funds in India can also increase in value over time, as the underlying REITs appreciate in value or acquire more assets. This means that investors can also benefit from the capital gains from their REIT mutual funds in India, which can be higher than the returns from stocks or mutual funds.
• Diversification: REIT mutual funds in India can help investors diversify their portfolio, as they have a low correlation with other asset classes, such as stocks, bonds, or gold. This means that REIT mutual funds in India can reduce the overall risk and volatility of the portfolio, and enhance the risk-adjusted returns.
• Tax efficiency: REITs are exempt from corporate tax, as long as they distribute at least 90% of their income as dividends. This means that REITs do not have to pay any tax on their income, unlike other companies. This also means that investors do not have to pay any tax on the dividends received from REIT mutual funds in India, unlike other dividends. However, investors may have to pay capital gains tax on the sale of REIT mutual funds in India, depending on the holding period and the tax slab.
• Professional management: REITs are managed by a team of professionals, who have the expertise and experience in the real estate sector. They are responsible for selecting, acquiring, operating, and maintaining the properties, as well as raising funds and distributing dividends. This means that investors do not have to worry about the hassles and challenges of owning and managing real estate themselves.

 

However, investing in REIT mutual funds in India also involves some drawbacks, such as: REIT Mutual Fund

 

• Market risk: REIT mutual funds in India are subject to the fluctuations of the real estate market, which can be affected by various factors, such as demand and supply, economic conditions, interest rates, regulations, etc. This means that REIT mutual funds in India can lose value if the real estate market declines or faces a slowdown. REIT mutual funds in India are also subject to the fluctuations of the stock market, which can be affected by various factors, such as investor sentiment, corporate earnings, global events, etc. This means that REIT mutual funds in India can lose value if the stock market crashes or faces a correction.
• Liquidity risk: REIT mutual funds in India may face liquidity issues, as they invest in the shares of REITs, which can be illiquid or thinly traded. This means that REIT mutual funds in India may not be able to sell their shares quickly or at a fair price, if they need to raise cash or exit from an investment. REIT mutual funds in India may also face liquidity issues, as they depend on the availability and cost of debt and equity financing, which can vary depending on the market conditions. This means that REIT mutual funds in India may not be able to raise funds easily or cheaply, if they need to acquire new assets or refinance their existing debt.
• Regulatory risk: REIT mutual funds in India are subject to the regulations and compliance requirements of the authorities, such as SEBI, RBI, etc. These regulations and requirements can change from time to time, and affect the operations and performance of REITs. For instance, REITs have to follow certain rules regarding the minimum asset size, minimum public float, minimum distribution, etc. These rules can limit the flexibility and growth potential of REITs. REIT mutual funds in India also have to comply with the accounting and reporting standards, which can affect the valuation and transparency of REITs.

 

Therefore, investing in REIT mutual funds in India requires careful research and analysis, as well as a long-term perspective and a risk appetite. Investors should not invest in REIT mutual funds in India based on the hype or the dividend yield alone, but also consider the quality and performance of the underlying REITs, the financial health and governance of the REITs, the growth prospects and competitive advantages of the REITs, the valuation and returns of the REIT mutual funds in India, and the market conditions and trends of the real estate and stock sectors.

 

To help investors in investing in REIT mutual funds in India, we have compiled a list of the top three REIT mutual funds in India, based on their NAV, returns, portfolio, expense ratio, and rating. These are:

 

• Kotak International REIT Fund of Funds: This is a fund of funds that invests in units of SMAM Asia REIT Sub Trust Fund, which in turn invests in REITs and real estate related securities in Asia Pacific region. It has a NAV of Rs. 10.20 and a return of 11.67% since inception¹. It has a portfolio of 23 REITs and real estate related securities, with a majority exposure to Japan, Singapore, and Australia. It has an expense ratio of 1.11% and a rating of 4 stars by Value Research².
• 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 in turn invests in equity and equity related securities of real estate companies across the world. It has a NAV of Rs. 10.05 and a return of 10.82% since inception³. It has a portfolio of 55 real estate securities, with a majority exposure to the US, Japan, and China. It has an expense ratio of 1.79% and a rating of 3 stars by Value Research⁴.
• Mahindra Manulife Asia Pacific REITs Fund of Funds: This is a fund of funds that invests in units of Nikko AM Asia Pacific REITs Fund, which in turn invests in REITs and real estate related securities in Asia Pacific region. It has a NAV of Rs. 9.34 and a return of 9.04% since inception. It has a portfolio of 28 REITs and real estate related securities, with a majority exposure to Singapore, Australia, and Hong Kong. It has an expense ratio of 1.62% and a rating of 3 stars by Value Research.

 

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• 3 Best REIT Mutual Funds in India (2023) – Should You Invest? – NAVI-pedia
• REIT Mutual Funds: A Helpful Guide – NoBroker
• List of Top 3 REIT Funds in India (2023) – Aayush Bhaskar
• Best REIT Funds in India: Who Can Put Money in Real Estate Mutual Funds?

Top REIT Mutual Funds in India: Making Informed Investment Choices

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