What is Real estate investment trusts?
Real estate investment trust or in short REIT are listed on Stock exchanges. They can be traded as normal stocks (like you can buy or sell them) as you do for other stocks. There is no difference from trader or investor point of view. Now you need to understand the concept of REIT before making investment decision. As informed investment decision are always encouraged. REIT allows you to invest in real estate projects (majorly commercial projects).
As you all are aware investment in commercial real estate projects are very costly and you can not choose umbrella of projects to invest in. So you need more capital and that too needs to be invested in single commercial project. So your return depends on success of any one project (or rental income depend on that project alone).
But REIT solves the above two problems with ease. It allows you to invest in umbrella of projects means more than one project and money required is also very minuscule compared to direct investment in real estate projects. You can get benefit of rental income as well in form of dividends.
Listed Real estate investment trusts
The concept of REIT are new in India as these entities got listed on exchanges only few years back. Now they present additional investment option to Investors. I have already written a separate article on Power Infrastructure Investment trust as alternative investment option. You can explore them as well.
Below I have listed the REIT in Indian stock market as of now. The list is in alphabetical order and does not show any recommendation order or preference order.
Mindspace Business Parks REIT
You may have seen Mindspace buildings (typically SEZ special economic zone building catering the offices of IT companies). You can invest in those real estate projects by buying the above listed script.They primarily hold rental income commercial properties in major cities of India. So office space occupancy is one parameter you may be interested in means how much space of the company is rented out. As rental income will generate revenue and propel price increase as well as dividend income.
It is promoted by K Raheja corporate group. Below are the dividend paid by this company over last two years time frame. This will give you an idea about dividend income you can expect from the company.
- Dividend paid in year 2022 – 27.99 INR
- Dividend paid in year 2021 – 37.58 INR
At the current price point this translate into
- Dividend paid in year 2022 – 8.33%
- Dividend paid in year 2021 – 11.18%
Embassy Office parks REIT
It is India’s first listed REIT. After this company the first one we discussed above got listed. It is the largest official REIT in Asia by space. It also is primarily engaged in business of rental income from commercial offices spaces. You may have seen Embassy tech parks in different major cities of India. Those parks come under this company and rental income from those offices spaces generates revenue for this company.
So by investing in this REIT you are investing in those assets. At least 90% of cash flows are mandated to be shared with investors. Below is the dividend paid by it over last three years
- Dividend paid in year 2022 – 37.04 INR
- Dividend paid in year 2021 – 42.90 INR
- Dividend paid in year 2021 – 46.14 INR
Based on current price of the company it translates to
- Dividend paid in year 2022 – 10.89 %
- Dividend paid in year 2021 – 12.62 %
- Dividend paid in year 2021 – 13.57 %
Brookfield India Real Estate Trust
It is the smallest listed player in this space based on the market capitalization. It also has campus format office parks in different cities of India namely Gurgaon and Kolkata. This is major revenue stream for the company. It is the newly listed player in this space compared to other two. If we see the dividend history of it over the years
- Dividend paid in year 2022 – 25.3 INR
Based on the current price of the company it translates to
Dividend paid in year 2022 – 8.72%
Conclusion
Real estate investment trust are low volatile entities like you will not see very much price appreciation or depreciation in majority of trading sessions compared to stocks. The major income from them comes in form of Dividend to Investors not price appreciation.
So as a investor you should weigh in the pros and cons before taking an investment decision. If the dividend yield are you getting from them is good enough for you with slow price movement then you can explore it along with other InvIT investments I talked about in other article. These instruments can be used as a tool to diversify the portfolio and have passive income out of it in form of regular dividend payout.
They typically follow once in a quarter dividend policy by sharing the quarterly profit as part of dividend. So in case you want a quarterly income from the investment you can explore this option.