For Indians, real estate has always been the most desired asset type. The most common investment options include plots, homes, offices, and commercial spaces. The average Indian household keeps 84% of its capital in real estate and other tangible products, 11% in cash, and the remaining 5% in financial properties, according to a 2017 study by the RBI’s household finance committee titled “Indian Household Finance.”
Surprisingly, investor interest in real estate, mainly residential real estate, has dwindled substantially over the last decade due to low capital appreciation. For example, according to the National Housing Bank’s (NHB) housing price index, composite housing prices in 50 Indian cities increased by around 4% annually between June 2013 and September 2020. As inflation is factored in, the returns are negative. Investing in residential real estate for low rental rates of 1.5% to 2.5% would not seem to be a good idea. Commercial properties provide higher rental returns, but they need significant investment.
In the last two years, though, Indian funds have rushed to Real Estate Investment Trusts (REITs). The following pointers will help to understand better the exact meaning of REITs:-
What are real estate investment trusts (REITs)?
A REIT is a real estate investment trust that holds income-producing assets. In India, a REIT will currently only invest in commercial assets. REITs pool money from customers and spend it in real estate, just as mutual funds do. The best thing about a REIT is that it allows a retail investor to invest in commercial real estate, especially Grade A office space assets, which would otherwise be out of reach.
Why choose a REIT over a physical property?
Investing in physical real estate necessitates a substantial sum of money, as well as the time-consuming task of locating the ideal land. Deterrents include maintenance, liquidity, fees, and processing costs. For most people, owning a house is a dream come true. Beyond that, any real estate investment must be interpreted in terms of returns (growth) and return on investment (return on investment) (income or rental). Rental yields in the residential category are not very high, and we all know that valuation and development take time.
On the other hand, financing in REITs is a perfect way to diversify in the real estate space; it’s similar to owning a mutual fund rather than a single portfolio. REITs will also help you gain higher returns than physical real estate investments. A REIT allows you to invest in high-quality, high-yielding real estate that you wouldn’t be able to get as a retail investor. Most individuals must assess whether this makes sense in addition to their existing real estate assets.
Hence, with improved design and sound clarity in transactions, India’s commercial real estate has transformed in the last few years. This is attracting a large number of foreign investors to India. Given their global presence and extensive expertise, these investors significantly contribute to the expert management of a commercial real estate asset.
About Migsun-
With uncompromising loyalty towards serving in the real estate sector with quick accomplishments and top-notch assistance, Migsun has registered a legacy of 27 years with faith & credibility. With the purpose to grow high-quality real-estate icons beyond the reach of the people, Migsun Group is obliged to creating magnificent, resilient, and future-ready designs and cities with a global viewpoint.
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