Investing in REITs comes with a perfectly structured return on investment scheme that is mostly risk-averse and realistic.
This allows investors to gain significant returns on the amount they invest.
Mostly, REITs are an ideal investment arena for investors who wish to have steady income across the months without much risk.
Investors can gain capital gains after they sell their REIT units and even dividends on the investments, enhancing their revenue potential.
What are REITs?
Real Estate Investment Trust, or abbreviated to REIT, is an entity that is formed with the purpose of channeling the funds that can be invested into owning, operating, or financing real estate that produces significant income.
If you, as an investor, want access to the real estate market, you can do so easily by investing in the shares of a REIT and getting exposure to the several real estate companies in the business. Without investing in any real estate stock.
Currently, there exist 3 REITs in India that have been registered and approved by the Securities Exchange Board and have been listed in the Indian stock market.
To begin investing in any of the following REIT funds, you will need a demat account. If you don’t have one, Sign up for Zerodha – our #1 recommended brokerage.
Here are the top 3 REIT funds in India.
1. Mindspace REIT
Mindspace REIT is one of the best-graded portfolios in the real estate market in India.
Sponsored by the K Raheja Corp Group, the portfolio includes well-managed offices spaces in Pune, Mumbai, Chennai, and Hyderabad.
The company grew its revenue to around 1600 crores in the last four years and has been up by 5 percent in 2021.
Even the net asset value of the stock has moved up to 345.2 from 326.1 this year (2021).
The best thing about investing in this particular REIT is that it offers 90%of NDCF as post-tax yield, along with all the SPVs being owned by REIT.
Only Mindspace Hyderabad shares its ownership with the Government of Andhra Pradesh. It currently trades at 322.0 INR.
Key Points of Mindspace REIT–
- Net operating income (NOI) has also increased for the REIT and gone up to 1374.1 crores.
- Loan to value is at 14 percent
- Distribution yield is at 7 percent
- Net debt to NOI is 2.5 times
- EBITDA has fallen to 669 crores
- Cash and short-term investments have increased to around 360 crores.
- Mindspace REITY has the largest tax-free distribution
2. Embassy REIT
Embassy REIT is the second REIT on our list, listed on the Indian stock market, backed and sponsored by Embassy and Blackstone.
It was the first-ever listed REIT on the stock exchange and is also the largest one to exist in the whole of Asia by its area.
This REIT operates in 42.4 million square feet and includes eight office parks, one 100 MW solar power plant, and two hotels in its portfolio.
The completed operating area of the REIT is 32.3 million square feet, with occupancy close to 90 percent in 2021. The biggest markets for this REIT are Bangalore, Mumbai, and Pune.
Revenue for the company has grown drastically over the years, touching 2360 crores in 2021.
Ever since the raising of refinancing the company’s debt, the average cost of borrowing for Embassy REIT has dropped to around 7 percent. It currently trades at 360.13 INR.
Key Points of Embassy REIT –
- They have a weighted average lease expiry of 7 years.
- EBITDA has grown by 14 percent in 2021
- NOI has grown by 12 percent in 2201
- Operating margins stand at 86 percent
- The third-quarter of 2021 witnessed the company raising 5200 crores through NCDs to refinance the debt it held.
- The Embassy REIT is highly focused on the NCR and Bangalore region.
3. Brookfield India REIT
The newest REIT to join the other two in the Indian stock market is the Brookfield India REIT.
Sponsored by Brookfield AMC, it is the only institutionally managed commercial real estate portfolio. Their commercial properties are spread across 14 million square feet in Noida, Gurugram, Mumbai, and Kolkata.
They are also in the process of acquiring another 8.2 million square feet to expand their projects.
The main market for Brookfield India REIT is the Delhi NCR region, which includes more than 50% of the total asset value of the company.
The portfolio definitely holds the potential to witness an increase in the mark to market from 31 percent to 34 percent in the year 2023. It currently trades at 294.1 INR.
Some other data about Brookfield India REIT –
- The weighted average lease expiry is 7 years
- TCS, Cognizant, and Accenture make up most of the leased area.
- The total debt of the company stands at 2120 crores.
- They have a low value of 18 percent
- Cash flow from operations increased from 21.5 crores to 80.7 crores in 2021.
- Cash flow from financing stands at 205.5 crores in 2021.
- It offers the highest occupancy rate and a dividend yield.
All the three REITs mentioned trade in both the Bombay Stock Exchange and National Stock Exchange.
They are the only three listed REITs as of now and hold great potential for significant returns in the future.
They can be traded on the stock exchange like any other stock and require a Demat account as a mandate.
REITs have a great scope and potential to enable investors to make money from trading these real estate portfolio companies. The minimum investment criteria for investing in the REITs are also not much and only require you to invest INR 15,000.
If you wish to benefit from constant income and reduced risks, REITs are the best investment arena for you!