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Industry : Asset Management
Functional Area : Equities
Activity: Question posted: 05 14 2008 09:20:34 +0000, 2 answers, 709 views, last activity 07 06 2010 20:18:08 +0000
 
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  Answered by     Padmanabhan R, Articled / Audit assistant, Finance student  | 08 09 2009 18:55:04 +0000
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REIT pool investments and invest in real estate either through properties or mortgages. It operates like a mutual fund and benefit from capital appreciation and get regular payments, rent. The important features are better liquidity and pass through structure. They have very low correlation with other asset options and the pass through structure offer tax benefits. They enable investing in large scale real estate without making huge commitments. REIT distributes 90% of taxable income as dividend and so is not taxed at the corporate level.   REIT is highly popular in US, but is only taking form in India.

  Answered by     Sridhar Bojja, Operations Manager - ICICI Bank  | 05 16 2008 09:42:09 +0000
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A security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages.

REITs receive special tax considerations and typically offer investors high yields, as well as a highly liquid method of investing in real estate.

Equity REITs: Equity REITs invest in and own properties (thus responsible for the equity or value of their real estate assets). Their revenues come principally from their properties' rents.

Mortgage REITs: Mortgage REITs deal in investment and ownership of property mortgages. These REITs loan money for mortgages to owners of real estate, or purchase existing mortgages or mortgage-backed securities. Their revenues are generated primarily by the interest that they earn on the mortgage loans.

Hybrid REITs: Hybrid REITs combine the investment strategies of equity REITs and mortgage REITs by investing in both properties and mortgages.
 
Individuals can invest in REITs either by purchasing their shares directly on an open exchange or by investing in a mutual fund that specializes in public real estate. An additional benefit to investing in REITs is the fact that many are accompanied by dividend reinvestment plans (DRIPs). Among other things, REITs invest in shopping malls, office buildings, apartments, warehouses and hotels. Some REITs will invest specifically in one area of real estate - shopping malls, for example - or in one specific region, state or country. Investing in REITs is a liquid, dividend-paying means of participating in the real estate market.

 
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