Investment in Real Estate without buying property? Possible, if you know these rules

There are many ways to invest in India as there are multiple business areas. Real Estate is considered as one of the most lucrative business sectors in the growing economy. But is it possible to invest in Real Eastate without buying any property? Know how can make an investment here.

What are REITs?

You can think of a REIT as a mutual fund. The only difference is that instead of investing in stocks or bonds, it pools the money of many investors and invests it in large commercial projects, such as office buildings, malls, hotels, or warehouses. The rent generated from these projects is distributed among REIT investors as dividends. Currently, only a few REITs are listed in India, such as Embassy Office Parks, Mindspace Business Parks, and Brookfield India. However, their popularity is rapidly increasing. At a time when property prices in major cities are skyrocketing, REITs offer small investors the opportunity to start with just Rs 10,000. The best part is that they are listed on a stock exchange, meaning they can be bought or sold at any time like shares. This makes them much more liquid (easily converted into cash) than traditional property investments.

How do REITs generate income?

There are two main ways to earn money from REITs. First, you receive regular dividends from rental income, i.e., a share of the rent generated by the buildings. Second, you benefit from capital gains when the value of REIT units appreciates. Listed REITs in India are required to distribute at least 90% of their net distributable cash flow to investors, so they offer good potential for regular income.

Risks in REITs?

REITs aren’t foolproof. Their performance depends on the occupancy of office and retail space and the demand for rentals. If companies reduce office space or footfall in malls decreases, rental income could decline. Since these are traded in the market, their prices can fluctuate with changes in interest rates or investor sentiment.

How to Invest in REITs in India

Investing in REITs is very easy. You can buy REIT units directly through the NSE or BSE, just like buying shares. Or you can invest in mutual fund schemes that invest in REITs. The entry cost is low, the paperwork is almost non-existent, and you get the benefit of investing in multiple good properties at once.