Real Estate Investment Trusts (REITs) manage and distribute rental income from large rent earning properties on behalf of investors. Under the structure proposed by the Union Budget and the Indian Trusts Act, REITS are now allowed tax pass through status. There are 5 things an investor should know about these changes:
- REITs must be registered as a trust. (REITs will have a five member investment committee, a manager, a sponsor and trustee)
- Stock structure will resemble the current mutual fund structure in India.
- Instead of stocks, REITs will have real estate properties as the underlying assets.
- Minimum unit size is expected to be RS 1 lakh and each person has to buy 2 units.
- Mandatory listing on the exchanges (the REIT can raise money from unit holders and offer less than 25% to the public)
The Securities and Exchange Board of India will be looking to test the minimum unit requirements of this initiative with informed investors first but investors can be confident that this means huge changes for investing in India. (Business Standard)