A REIT or Real Estate Investment Trust is a fund created out of investments of several investors, which is further invested in real estate assets such as buildings, warehouses, car parks, hotels, hospitals, convention centres and SEZs.
Sebi has prescribed the minimum threshold for investing in a REIT at Rs 2 lakh. However, the issuer may indicate a minimum lot size for investment in the offer document.
Who can invest?
The offer document or prospectus of the REIT indicates the eligible categories of investors who can invest in the REIT.
How to invest?
A REIT can be launched as an initial public offer (IPO). An investor can apply for investment in the REIT through his demat account, either online or by filling up the IPO form and indicating demat account details. After the issue is closed, the REIT will allot units to eligible investors.
Trading on exchange
Once the offer period is closed, investor can sell the units listed on the exchange. The minimum lot size for sale on the exchange is Rs 1 lakh.
The income received from REITs is subject to tax depending on the nature and proportion of receipts. So the income received in the form of dividend, rent and/or interest and distributed shall be deemed as dividend, rental income and/or interest income, respectively, in the hands of the investors. In case of sale of REIT, the investor may be subject to short- or long-term capital gains tax depending upon the period of holding the investment.
Points to note
1. If the subscription amount is lesser than 90% of issue size, the REIT shall refund subscription money to all investors.
2. As investors hold units that are traded on the stock exchange, REITS have relatively lower liquidity risk as compared to directly investing in real estate.