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Both REITs and InvITs are pivotal investment avenues in India and offer a chance to get exposure to real estate and infrastructural investment.
Both REITs and InvITs offer an array of benefits to investors. (Photo Source: Freepik)
Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) have emerged as critical real estate investment avenues in India. As the country focuses on real estate development and modernising infrastructure, the trusts give investors a structured programme to understand and evaluate information about these sectors.
Companies that own, operate, or finance income-producing real estate across a range of property sectors fall under REITs, whereas similar investment vehicles focused on infrastructure projects are called InvITs. Through Real Estate Investment Trusts, investors can earn a share of the income generated through ownership of commercial real estate. Investors don’t have to directly buy, manage or finance any properties under REITs. The trusts were introduced in India in 2014.
The REITs have gained prominence among investors who want exposure to the real estate sector. Similarly, InvITs help drive investment in a diverse set of infrastructural assets, focusing on toll roads, power plants and pipelines. Introduced in 2016, InvITs attract long-term capital for infrastructural growth in the country.
Both REITs and InvITs represent a transformative approach to real estate and infrastructural investment, offering an array of benefits to investors. However, there are certain key distinctions that an investor must consider before going ahead with either of them.
Structure: Both REITs and InvITs pool investor funds and have a designated trustee, sponsor and manager, but their priorities differ from each other. Under REITs, the focus is on completed and income-generating real estate, while InvITs invest in roads, power plants and other infrastructural projects. REITs require at least 80 per cent of their assets to be in completed properties and a maximum of 20 per cent in under-construction projects or related securities. Under InvITs, it is mandatory to have 80 per cent of the investment in completed, revenue-generating infrastructure assets.
Risk: As REITs offer a diversified portfolio in the real estate world, they come with significantly less risk on investment than InvITs, where infrastructural projects may be disrupted by operational and regulatory challenges.
Minimum Investment: Earlier, the minimum subscription amount required for REITs stood at Rs 50,000 and Rs 1,00,000 for InvITs. This threshold has now been lowered to benefit investors, who can now subscribe to both options for Rs 10,000-15,000.
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al… Read More
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Delhi, India, India
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