Investment Real estate requires a higher ticket size allocation. People find it difficult to buy property due to low liquidity and large investments. invested in REIT There is an alternative way to get exposure to real estate. REITs or Real Estate Investment Trusts (REITs) are funds that invest their corpus in income producing commercial and industrial properties.

Features of REITs

One investor One can also buy a share of the REIT at its listed price and sell it on the exchange at the prevailing market price. An investor earns income in the form of interest, Dividend, redemption SPV and capital gains.

investing in REITs

You need to have a Demat account to invest in REITs. REITs are listed on a stock exchange and investors can invest in units of REITs in the same way that one buys shares on the exchange.

tax aspect

Interest income received from REITs is subject to taxation. The tax on dividend income depends on whether the REIT had availed special tax concessions from the government. If yes, then the dividend is taxable in the hands of the investor. If not, no tax is applicable. Income from amortization of SPV loan is also not subject to any tax in the hands of the investor.

REIT sales

Capital gains made on the sale of Indian REITs are subject to STCG tax if held for less than one year at the rate of 15%. LTCG is taxed at the rate of 20% on investments exceeding Rs 1 lakh for more than one year. It is always advisable to consult a tax advisor before investing in such properties.

things to note

• Investing in REITs can be done as a percentage allocation of the overall asset allocation.
• Some MFs invest in REITs, investors can also choose to invest in these funds to get allocation to REITs.

Content on this page is courtesy of Center for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.