Buy a Flat or Invest in REIT?

If you are thinking of buying a house to live in, don't look at it as an investment but if you are thinking of a second house, REIT provides a very good alternative.

REIT or Real Estate Investment Trust are asset classes that have been launched in Indian markets in the recent years. REITs usually invest in rent generating real estate projects like business parks , lease them for a long interval and then generate profits from the rental yield. At least 90% of the profits are distributed back to the investors in the form of dividends.

There are multiple advantages of investing in REITs:
1. Easy discovery- You can buy REITs from any broking platform like Zerodha, HDFC securities etc. Indian markets have 3 listed REITs- Mindspace, Embassy and Brookfield
2. No Minimum amount, No lumpsum payments required
3. No registry and legal costs
4. High liquidity- Selling REITs is as easy as selling shares

However, like real estate investing, REITs do have some risks involved too:
1. Legal complications are possible for the projects undertaken by REIT
2. Sometimes (e.g. covid times) occupancy rates of the properties are low leading to low rental income

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