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REIT is a company that owns and operates income generating real estate. Like Mutual Funds, REITs pool capital from numerous investors to invest in commercial properties. In return investors receive Income in the form of dividend & interest at regular intervals

Listed REITs

Name Last Traded
Price (₹)​
Market Cap
(₹ In Crs.) ​
FY23 Distribution (₹/Unit) FY23 Yield (%) ​ FY24 Projected Distribution*(₹/Unit) FY24 Projected Yield* (%) Action
Brookfield India Real Estate Trust 252 11,072 20.10 7.30 20.6 8.17 BUY
Embassy Office Parks REIT 363 34,556 21.71 6.70 21.8 6 BUY
Mindspace Business Parks REIT 343 20,388 19.10 6.90 19.2 5.6 BUY
Nexus Select Trust 129 19,483 NA NA 7.6 5.91 BUY
^Annualized *I-Sec Research estimates

What is REIT?

A company that owns a portfolio of income-generating properties

Like Mutual Funds, in a REIT, money is pooled from numerous investors

In return, investors are issued units representing fractional ownership

Income from properties is distributed to unitholders at regular intervals

Income is distributed through Dividends, Interest & Capital Repayment

Post IPO, REITs are listed & traded on stock exchanges like equity shares

How REITs works?​

  • Investors

    Investors

    Invest In
    Units

    Distribution

  • Acquisition/Capital Investment

    REITs

  • Assets

    Assets

    Acquisition/Capital Investment

    Rental Income

how-REITs-works

Why Should You Invest in REITs?

Fractional Ownership

Access to income generating real estate with as low as Rs. 300

Regular Income

SEBI regulations require REITs to payout 90% of distributable cash flow

Capital Appreciation

Arising from increase in value of underlying real estate over time

Diversification

Across geographies & tenants. Eliminates concentration risk

Easy Liquidity

Compared to physical real estate, REITs are listed & traded on exchanges

Professional Management

Ensures optimal return on investment, transparency & accountability

Important Terminologies

Weighted Average
Lease Expiry (WALE)

Average expiry period of all the leases within the property

Committed
Occupancy

Area which is unoccupied but for which letter of intent/ agreement to lease have been signed

Vacancy Rate

Percentage of all available units in a rental property that are vacant or unoccupied

Growth in Net Operating Income & EBITDA

Net Operating Income and EBITDA should be consistently increasing

Net Asset Value
(NAV)

NAV is the net value of a fund's Assets less its Liabilities, divided by Number of shares/units outstanding.

Key Performance Indicators​

FY24 Projected Distribution Yield (%)

FY 24 Projected Distribution split (%)

Key Performance Metric Brookfield Embassy Mindspace Nexus
Issue Date Feb-21 Apr-19 Aug-20 May-23
Issue Price 275 300 275 100
Current Price
NAV as of Sep ’23 323 399 370 138
Distribution till date  50.55 100.25 56.73 2.98
(-) Dividend income 28.32 27.98 51.96 1.84
(-) Interest Income 0.96 26.12 4.77 0.85
(-) Capital Repayment 21.27 46.15 0 0.29
Indicative XIRR since listing 12.45% 3.38% 10.96% 73.73%
Distribution Update - FY 2024
H1 FY24 Distribution per Unit - 8.25 10.91 9.51 2.98
(-) Dividend income 0.00 4.68 8.63 1.84
(-) Interest Income 4.09 1.91 0.95 0.85
(-) Capital Repayment 4.16 4.32 0 0.29
Projected Distribution for the year 18.25 21.83 19.20 7.80
Portfolio Update
Total Portfolio (msf) 25.3 45.3 32.3 NA
Completed Area (msf) 20.7 35.3 26.1 11.2
Net Opertating Income (NOI) 346 Cr 718 Cr 491 Cr 600 Cr
Occupancy Rate 88% 85% 87% 84%
Rent psf 82 85 67 NA
MTM Potential 19% 12% 3.70% 20%
Weighted Average Lease Expiry (WALE) 7.4 Years 6.9 Years 6.9 Years 5.4 Years
Area coming under expiry in FY 24 (msf) 1.1 3.3 1 0.3
Net Debt to value 34% 29% 19.8% 20%
Top 10 Tenants (% of total presence) 44% 36.20% 29.70% NA

Geographical Distribution​

Brookfield REIT

Mumbai
Noida
Kolkata
Gurgaon

Embassy REIT

NCR
Mumbai
Pune
Banglore

Mindspace REIT

Mumbai
Pune
Hyderabad
Chennai

Nexus REIT

North India
West India
East India
South India

Sector-Wise Distribution​

Brookfield REIT

Technology
Consulting & Analytics
Financial Services
Others

Embassy REIT

Technology
Financial Services
Consulting & Analytics
Others

Mindspace REIT

Technology
Financial Services
Telecom & Media
Others

Nexus REIT

Urban Consumption Centres/ Malls
Offices
Hotels
Renewable Power Plant
*As on 30 Sept, 2023

REIT Versus Real Estate

Particulars REITs Real Estate
Low Capital Requirement Invest as low as Rs. 300-400 Usually High capital amount
Liquidity Tradable on Exchange Liquidity takes longer time
Low Transaction Cost Very Low On the higher side
Diversification Widespread Investments Concentration risk
Control Professionally managed Direct control

Taxation on REIT

Nature of Income Tax Liability for Unit Holders
Dividend Income* Exempt in the hands of unitholders
Rental Income As per marginal tax slabs
Other Income (If any) As per marginal tax slabs
Capital Repayment(till the cost at which unit was issued) Treated as return of capital,i.e reduction from cost ofacquisition
Sale of Units (Long Term Capital Gains – Holding Period > 3 Years) Gains up to ₹1 lakh are exempted. Above ₹1 lakh, taxable at 10%
Sale of Units (Short Term Capital Gains – Holding Period < 3 Years) Gains taxed at 15%
* If REIT pays tax under section 115BAA, dividend will be taxable as per the tax slabs. TDS @ 10% will be applicable.

FAQs

A Real Estate Investment Trust (“REIT”) is an entity that owns & operates income-producing real estate. REITs pool capital of numerous investors (just like a mutual fund) to invest in large-scale, high-value income producing real estate. This makes it possible for individual investors to earn income/dividends from real estate investments without having to buy, manage or finance any properties themselves. REITs invest in a wide range on properties including office building, apartments, cell towers, hotels, data centers, warehouses, malls, cold storage, etc.

A REIT is set up in the form of a trust registered with Securities and Exchange Board of India (SEBI). The sponsor or the investor who creates the trust, transfers ownership of the properties to the REIT in exchange for units. The sponsor holds a certain minimum percentage of the total units and makes an Initial Public Offer (IPO) of remaining units within three years to get REIT listed on the stock exchange. Post issuance, investors hold the REIT units just like mutual fund units.

REITs have a three tier structure which includes Sponsor, Trustee and Manager.

Sponsor: The sponsor is the entity who forms the REIT. They set up the REIT and transfer the properties/real estate owned by them to the trust. A real estate developer desiring of raising funds plays the role of a sponsor in a REIT

Trustee: The trustee is a person appointed by the sponsor, who holds the assets on behalf of the unitholders.

Manager: The trustee appoints a manager who manages the REIT assets and is responsible for making investment decisions. The manager is typically a private company closely held by the sponsor

REITs generate returns for investors in three ways –

Dividend Income: REITs are required to distribute at least 90% of its net distributable cash flow i.e. rents minus the expenses to manage the properties, as dividends at least twice a year. The dividend payouts can rise if rental rates rise or if the REIT builds additional properties and leases them out. Higher the rent, higher the dividends.

Interest Income: REITs can distribute interest income that it earns on loans given out to its subsidiaries. Most REITs do not own properties directly. Instead, they hold stakes in Special Purpose Vehicles (SPVs) which, in turn, directly hold the properties. REITs lend money to these SPVs for constructing or managing a building and the SPVs in turn repay those loans back with interest to the REIT over time.

Capital Appreciation: The price of an REIT’s units can rise or fall over time just like stock prices and result in capital gains or losses for the investor. Higher incomes due to rent escalation clauses and on-boarding of new properties lead to a re-rating of an REIT unit’s price.

Investors have multiple ways to invest in REITs. You can buy / sell the units through ICICI Direct platform as the REITs are listed on the stock exchanges.

Also, an investor can apply to the Initial Public Offering (IPO) of the REIT. The minimum application value will range between Rs. 10,000 – Rs. 15,000.