Owning a piece of the real state may become more affordable now. The minimum subscription amount in Real Estate Investment Trusts (REIT) has now been reduced from the earlier limit of Rs 2 lakh to Rs 50,000. The decision was taken by the Securities and Exchange Board of India (Sebi) board recently and the move may bring in several more investors to diversify their investment portfolio by taking exposure to the real estate sector. Although there are no such REIT offers in the market currently, Embassy Office Parks, a joint venture of US private equity firm Blackstone Group and Embassy Group, had already filed its draft offer document with the Sebi and may hit the market anytime soon. REITs are similar to a mutual fund wherein investors pool funds which are invested by the sponsor of the scheme into the real estate asset class which acts as the underlying securities. However, the working of a REIT differs a lot. During the launch offer, an investor may buy REIT units which can then be traded on the stock exchanges and thus ensure liquidity. As per the rules, the minimum allotment will be in multiple of one lot each consisting of 100 units and after listing trading will be in multiple of one lot. The REIT shall issue units only in dematerialized form to all the investors. How much return a REIT investor can expect With respect to distributions made by the REIT and the SPV, not less than ninety per cent of net distributable cash flows of the SPV shall be distributed to the REIT. Further, not less than ninety per cent of net distributable cash flows of the REIT shall be distributed to the unit holders; and any such distributions shall be declared and made not less than once every six months in every financial year. As a REIT investor, the earnings may be in the form of regular income and capital appreciation, if any. In Indian scenario, most industry experts expect return of about 14 percent from the REITs. Where does REIT invests A REIT shall hold at least two projects, directly or through SPV, with not more than sixty per cent of the value of the assets, proportionately on a consolidated basis, in one project. Also, as per the rules, not less than 75 per cent of the revenues of the REIT and the SPV, other than gains arising from sale of properties, shall be, at all times, from rental, leasing and letting real estate assets or any other income incidental to the leasing of such assets. The investment may be in under-construction properties, 'completed and not rent generating' properties subject to caps and conditions. REIT is also allowed to invest in listed or unlisted debt of companies or body corporate in real estate sector, mortgage backed securities, equity shares of listed companies, money market instruments and government securities amongst others. Conclusion Real estate has always been considered an illiquid and a big-ticket investment. REITs provide an opportunity to diversify across real estate as an asset class. REITs are primarily a hybrid investment seeking capital appreciation and even income ( rent) from the underlying securities of the sponsor. With twin benefits of REIT and the rules in place, one should expect the REIT to provide a new investment option to the Indian investors soon.