What are REITs?
REITs are companies that own or operate high-income generating real estate and offer a proportional ownership to the investors. In return, investors get rental income which is distributed as dividends. The REITs pool in money from investors and buy high-income real estate (malls, office buildings, commercial spaces etc.)
The rental income which the property generates is returned to the investors in the form of dividends. As per Indian Regulations, it is compulsory for REITs to distribute at least 90% of its income to the unitholders as dividends.
Investing in REITs: Top REITs and their Performance
At present there are four REITs available for direct investment in India →
Let’s take a look at each of these REITs in detail:
Brookfield India REIT
Brookfield India REIT is managed and sponsored by Brookfield Asset Management, which is a one of the world’s largest alternative asset manager. It is listed as a stock on NSE and BSE.
| Time period | 1 Month | 6 Months | YTD | 1 year |
|---|---|---|---|---|
| Returns | -0.81% | -11.56% | -10.08% | -18.15% |
As on 14th July 2023
Current Performance of Brookfield India REIT vs Nifty Realty
Dividend History of Brookfields India REIT
| Ex-Dividend Date | Cash Amount | Declaration Date | Record Date |
|---|---|---|---|
| 26/05/2023 | ₹5 | 19/05/2023 | 26/05/2023 |
| 15/02/2023 | ₹5 | 07/02/2023 | 15/02/2023 |
| 15/11/2022 | ₹5.10 | 07/11/2022 | 16/11/2022 |
| 11/08/2022 | ₹5.10 | 03/08/2022 | 12/08/2022 |
| 25/05/2022 | ₹5.10 | 18/05/2022 | 26/05/2022 |
| 18/02/2022 | ₹5 | 11/02/2022 | 21/02/2022 |
| 16/11/2021 | ₹6 | 09/11/2021 | 17/11/2021 |
| 17/08/2021 | ₹6 | 10/08/2021 | 18/08/2021 |
Embassy Office Parks REIT
Embassy Office REIT was India’s first publicly listed REIT. It is officially the largest REIT by area in Asia. Its portfolio mainly comprises various office parks and office buildings. EMBASSY OFFICE REIT is majorly sponsored by Blackstone which is a leading global investment business. It is listed as a stock on NSE and BSE.
| Time period | 1 Month | 6 Months | YTD | 1 year |
|---|---|---|---|---|
| Returns | 2.40% | -9.95% | -9.79% | -17.70% |
As on 14th July 2023
Current Performance of Embassy Office Parks REIT vs Nifty Realty Index
Dividend History of Embassy Office Parks REIT
| Ex-Dividend Date | Cash Amount | Declaration Date | Record Date |
|---|---|---|---|
| 04/05/2023 | ₹5.61 | 27/04/2023 | 06/05/2023 |
| 03/02/2023 | ₹5.31 | 25/01/2023 | 03/02/2023 |
| 31/10/2022 | ₹5.46 | 20/10/2022 | 01/11/2022 |
| 28/07/2022 | ₹5.33 | 21/07/2022 | 29/07/2022 |
| 06/05/2022 | ₹5.26 | 28/04/2022 | 09/05/2022 |
| 04/02/2022 | ₹5.20 | 28/01/2022 | 07/02/2022 |
| 09/11/2021 | ₹5.66 | 29/10/2021 | 10/11/2021 |
| 04/08/2021 | ₹5.64 | 28/07/2021 | 05/08/2021 |
| 06/05/2021 | ₹5.60 | 29/04/2021 | 07/05/2021 |
| 18/02/2021 | ₹4.55 | 12/02/2021 | 22/02/2021 |
| 09/11/2020 | ₹5.50 | 02/11/2020 | 10/11/2020 |
| 13/08/2020 | ₹5.83 | 06/08/2020 | 14/08/2020 |
| 27/05/2020 | ₹6.89 | 19/05/2020 | 28/05/2020 |
| 20/02/2020 | ₹6.10 | 14/02/2020 | 24/02/2020 |
| 18/11/2019 | ₹6 | 11/11/2019 | 19/11/2019 |
| 20/08/2019 | ₹5.40 | 12/08/2019 | 21/08/2019 |
MINDSPACE BUSINESS PARKS REIT
Mindspace Business parks REIT is a leading REIT in India with a major presence in Mumbai and Hyderabad. The company primarily holds interests in rental yielding commercial real estate assets (Grade A office portfolio). It is part of the K Raheja Corp Group which has presence across the entire real estate value chain. It is listed as a stock on NSE and BSE.
| Time period | 1 Month | 6 Months | YTD | 1 year |
|---|---|---|---|---|
| Returns | -2.05% | -11.13% | -10.27% | -13.74% |
As on 14th July 2023
Current Performance of Mindspace Business Parks REIT vs Nifty Realty Index
Dividend History of Mindspace Business Parks REIT
For more details on dividend history of Mindspace Business Parks REIT, visit here
Nexus Select Trust REIT (“Nexus REIT”)
Nexus Select Trust REIT is the 1st publicly listed consumption center REIT in India. It was recently launched by IPO on 11th May 2023. The Portfolio comprises 17 best-in-class Grade A urban consumption centers. It is listed as a stock on NSE and BSE.
| Time period | 1 Month | 6 Months | YTD |
|---|---|---|---|
| Returns | 6.75% | nil | 10.66% |
As on 14th July 2023
Dividend History of Nexus Select REIT
For more details on dividend history of Nexus Select REIT, visit here
REITs vs InvITs
The major difference is that while REITs focus on the real estate sector, InvITs invest in infrastructure projects (roads and utilities).
| Basis | REITs | InvITs |
|---|---|---|
| Sectors Covered | Real estate which includes commercial buildings, residential housing,etc | Infrastructure Projects such as roads, transmission utilities |
| Risks | REITs are less risky compared to InvITs because they are free from political or regulatatry threats. | InITs are more risky because infrastructure projects are usually concerned with the government and comes with regulatory risks. |
| Liquidity | Since they are traded in smaller units they are much more liquid | InvITs are traded in large lots which makes them slightly less liquid. |
Advantages of REITs over physical real estate
- One of the most important advantages of REITs is that they are more liquid than physical properties and there is no hassle of finding a buyer and a seller.
- Even small investors can invest in REITs since they are traded as units and reap the benefits of the real estate sector.
- The pricing of REITs is transparent- there are no hidden charges (brokerage, stamp duty, etc) since it is exchange traded.
- SEBI regulates the REITs-thus, the interests of the investors are protected.
Disadvantages of REITs
- The income from REITs is subject to taxes. There are no major exemptions on taxable income.
- The price is constantly fluctuating and is affected by the real estate market.
- The investors or the unitholders do not have voting rights
Taxation of REITs in India
In India, REITs have specific tax rules. Here are the key points:
- Dividend Distribution Tax (DDT): REITs must distribute 90% of their income as dividends to unit holders. DDT is currently 15% plus charges.
- Taxation of Unit Holders: Dividend income is taxed based on applicable rates. Non-resident holders may have different rates based on DTAA- stands for Double Taxation Avoidance Agreement, which is a bilateral agreement between two countries to prevent individuals or businesses from being taxed twice on the same income.
- Capital Gains: Selling REIT units results in capital gains. Short-term gains (less than 36 months) are taxed at applicable rates. Long-term gains (36 months or more) are taxed at 20% with indexation.
- Withholding Tax: REITs deduct 10% TDS on dividend income, varying for non-resident holders based on DTAA.
Note: Tax laws can change, so consult professionals or refer to latest regulations for accurate information.
Upcoming REITs in India
The most recently launched REIT in India was Nexus Select Trust REIT which was launched in May 2023. There are no upcoming REITs in India currently.
How to invest in REITs?
Through Exchange: An investor can purchase REITs through the stock exchange. Since these are similar to ETFs (Exchange Traded Funds), they can be bought and sold daily like any equity share.
Through Mutual Funds: An investor can also invest in REITs through mutual fund companies. These mutual fund companies invest in both India based and Global REITs. The investors can buy these mutual funds through their preferred brokers. Investors get the benefit of diversification and get exposure to global real estate markets.
Through Exchange Traded Funds: ETFs or exchange traded funds also offer an opportunity to invest in REITs. These funds are traded on the stock exchanges and the value is determined by the market forces. These ETFs invest only in REITs similar to mutual funds but offer more liquidity than mutual funds as they are traded on the exchanges.
This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.