REITs are investment trust operating income-producing real estate
REITs are investment trusts that own and, in most cases, even operate income-producing real estate. The trusts operate like mutual funds and invest in income-generating real estate assets like commercial realty, residential property, warehouses, hospitals, hotels and shopping centres
So, while mutual funds invest in equities or bonds, REITs invest in real estate and make it possible for individuals and institutions to invest in real estate. The stockholders of REITs earn a share of the income produced through the investment, without actually buying the property. The concept was first introduced in the US in 1960 and is in place in many other developed nations.
A REIT is a trust which then creates a Special Purpose Vehicle (SPV) to invest in income-generating real estate. A part of the pooled money is also invested in the stocks of listed real estate companies. Like close-ended mutual funds, REITs get listed and investors are able to buy/sell units of REITs, as is the case with mutual funds. This also ensures liquidity and exit opportunities. For an individual investor, the REITs bring the benefits of listing, a stable source of income, investment diversification with small initial investments and professional management of the same.
Source: The Financial Express
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