|Black and grey|
What the draft regulations speak of and what they don't.
According to SEBI’s draft regulations, like mutual funds, REITs will use collective funds for owning and managing investments in real estate projects.
They will be managed by a separate real estate investment management company and will be required to distribute 90 per cent of their annual income as dividends. As safeguards, strict limits have been proposed on investments and borrowing by REITs.
Says G.R.K. Reddy, CMD, MARG, a construction company: “The regulations favour the investor by helping them channelise their savings into real estate in a safe mode. As REITs will invest only in developed properties, there will be zero speculation and this will help protect investor in a volatile scenario.”
He also points out that REITs will help investors to hedge against inflation, earn higher and consistent returns and also provide ease of exit.
On the flip side though, SEBI has yet to spell out tax rules and standard assessment values for REITs.
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“REITs should be treated as a long-term investment and retail investors need to know about the company they are dealing with,” he says.
Overall, REITs look like offering a complete package that make investing attractive for retail investors—low volatility, good dividends, convenient liquidity and professional management.
— Nitya Varadarajan