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Create equity, mortgage and hybrid REITs: Assocham

Special Correspondent

Chamber releases White Paper on Real Investment Trusts

NEW DELHI: In a bid to ensure participation of individuals and small investors in the ongoing real estate activities in the country, the Associated Chambers of Commerce and Industry of India (Assocham) has mooted a proposal to create equity, mortgage and hybrid real estate investment trusts (REITs) to offer investors high yield as well as a highly liquid method of investing in real estate.

Equity REITs invest in and own properties (thus responsible for equity or value of their real estate assets). Their revenues come principally from their properties' rents while mortgage REITs deal in investment and ownership of property mortgages, says Assocham.

These REITs lend money for mortgages to owners of real estate, or invest in (purchase) existing mortgages or mortgage-backed securities. Revenues are generated primarily by way of interest that they earn on the mortgage loans. Hybrid REITs combine the investment strategies of equity REITs and mortgage REITs by investing in both properties and mortgages.

These REITs are in vogue in the advanced economies of the U.S., Europe, Japan, Singapore, Malaysia, Thailand and Singapore and their creation in India will further prop up market sentiment and ensure larger participation of small investors in the booming real estate business.

Releasing a White Paper on Real Investment Trusts, Assocham chief, Anil K. Agarwal, said individuals could invest in REITs either by purchasing their shares directly on an open exchange or by investing in a mutual fund that specialises in public real estate.

Among other things, REITs invest in real estate, shopping malls, office buildings, apartments, warehouses and hotels. Some REITs invest specifically in one area of real estate, shopping malls for example, in one specific region, state or country. REITs were essentially a liquid, dividend paying means of participating in the real estate market, he said.

The chamber has underlined that the creation of REITs will not only improve the quality and quantity of finance for investment in commercial and residential properties but also expand access to a wide range of savings products on a stable and well-regulated basis.

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