The new guidelines of real estate mutual funds are awaited for a long time. All the investors will welcome it with open hands. It will attract small investors to invest their resources in real estate assets. It gives hike to unfriendly market, poor investors, property owners and builders as well. The formation of new guidelines has very positive impact on property financing market. The investment will be made in shares, mortgage – backed securities and instruments.
The Indian economy is growing very fast in real estate sector. The business opportunities are consequently increasing day by day. It has escalated the demand for residential and commercial properties. In India real estate business has many options for unlimited growth in every sector. In the present time it has become a lucrative sector for foreign investors in a big scale. Foreign investments have grown up from 40% – 45% per year. There is huge inflow of funds from Indian and Foreign investors both in real estate business. International investors like Morgan Stanley, Columbia Endowment Fund, and JP Morgan are investing in real estate business. They can invest in India directly and indirectly as per their requirement. The future of real estate business is bright and going to pay higher returns to the people associated with this business.
Real estate funds and real estate investment trust are used to diversifying the long term portfolio of investment. A real estate funds are invested in securities offered by public and real estate companies. This fund is invested in properties of commercial and corporate projects. It includes many types of properties like raw land, agriculture, apartments, and complex. We can invest it directly and through REITs as well.
A REIT is an association that finances the income generating real estate. They work just like mutual funds companies. In mutual funds people invest their combined income to buy a split of the commercial real estate. The taxable income is paid out as dividend to the shareholders. There are three main type REITs equity REIT, mortgage REIT and hybrid REIT. Equity REIT deals with hard real estate assets. They own, operate and trade it as well. Commercial and Residential mortgage are dealt by the Mortgage REIT. Hybrid REIT is the blend of equity and mortgage REITs. The high amount revenue of equity REIT is generated from rent from real estate rent. The revenue of mortgage REIT is generated through mortgage loans.
Merits of REITs investment
- We can invest in REIT with lower entry cost with just $500 or the price equal to a single share.
- REITs offer highly liquid technique of investing in real estate
- REITs investment is flexible investment system in which investors are allowed to invest in many properties. They can invest in real estate from saleable belongings to shopping malls.
Merits of Real estate investment
- Real estate fund investment provides the same benefit like mutual funds to their investors. The investors get the same portfolio and management support.
- Real estate investment investors get tax benefits from government for long term deposit.