Amidst the serious slowdown which the Indian real estate is facing for half a decade, commercial real estate has proved to be an exception. Although the commercial real estate sector was growing at a stagnant growth, the introduction of the REIT (Real Estate Investment Trust) by the Blackstone-Embassy Group fostered the growth further.
The Blackstone-Embassy Group REIT was listed on April 1, 2019 –becoming a landmark in the history of the real estate and creating one of the biggest real estate news in India. REIT will enable the small and mid-level investors to invest in Grade A commercial projects as it has already done in several Asian countries such as Singapore, Japan, Malaysia, Thailand and many more.
For investors, the minimum returns that REIT offers can range from 7 percent to 13 percent, depending on several factors such as quality of assets. While the real estate sector is facing cash crunch due to the liquidity crisis of the several prominent NBFCs, the greatest advantage of REITs is that it provides ease of investment to the retail investors.
Through REITs, investors can directly invest in equity and it can be done through the DEMAT account. Another benefit that comes along with it is the rental income by virtue of property being commercial. Commercial properties yield higher rental returns than the residential ones.
Moreover, REIT distributes 90 percent of the rental income to the unitholder while utilizing the remaining amount for business purposes. Any appreciation in the value of the unit adds to the over capital appreciation.
Real estate sector which was under continuous criticism for not being professional enough, REITs are promoting the required professionalism to the whole sector. Earlier, several NRIs and other foreign investors refrained from investing in the Indian realty sector due to a lack of transparency. REITs have provided transparency to the investors which have resulted in the increase in NRI and foreign investments.
This has resulted in changing the whole landscape of the Indian realty sector. Although it is only the beginning, experts believe it will result in changing the whole idea of how people invest in real estate and how it is developed.