Embassy Office Parks REIT is India's first Real Estate Investment Trust (REIT) listed on the the NSE and BSE stock exchanges.
REIT India: As an investor if you are wondering and looking to invest money in physical real estate, Real Estate Investment Trust (REIT) offers an alternative avenue to reap the potential of property market. Locking in funds in residential or commercial real estate comes with its own share of concerns. From running around to find the right location to paying different fees, from charges to register the property to finding the right tenant, different issues crop up including the maintenance of property. REIT, on the other hand, works somewhat similar to a mutual fund. In REIT investing, units/shares are allotted and its price variation determines the returns for the investor. Embassy Office Parks REIT is India’s first Real Estate Investment Trust (REIT) listed on the the National Stock Exchange of India and BSE stock exchange and has generated an absolute return of almost 33 per cent since its listing. Additionally, the REIT has declared a quarterly dividend of Rs 5.4 per unit in August.
The Embassy Office Parks REIT was listed on April 1, 2019 and since then the price of Embassy REIT is on the rise. The issue price of Embassy REIT was Rs 300, it got listed at Rs 308 and closed at Rs 314.67 on the first day of listing. Currently, on September 20, it is trading at close to Rs 396, an absolute return of almost 33 per cent in less than 6 months! The NIFTY Realty index over the same period has generated a negative return of about 4 per cent.
The Board of Directors of Embassy Office Parks Management Services Private Limited, Manager to Embassy REIT, at its Board Meeting held in August had declared a quarterly distribution of Rs 4,167 million or Rs. 5.4 per Unit. On a price of price of Rs 300, it translates into a quarterly return of 1.8 per cent. There is a possibility of capital gain or loss and income from dividend in REITs.
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To sum up
The structure of REIT is highly complex for most retail investors to fathom the risk involved. REIT is basically a trust which holds properties through a special purpose vehicle (SPV) and its structure comprises of three entities – A Sponsor, Trustees and the Manager. The REIT rules are framed and monitored by the market regulator SEBI and the listing and its trading has to be according to the guidelines. The high returns may not be expected in future but till the demand-supply for office space is high and the Sponsors continue to get high rentals, the investors may consider investing in it. The cost of owning a pie of the real estate market in India in paper-form could be met through REITs. With more such REIT offerings and as market develops, Indian investors will get more opportunities to own real estate at a fraction of cost and yet reap its benefit.