Invest in Reits? These are the things you need to be careful about
Real estate investing has been an important part of financial planning for generations. However, due to comparatively lower returns in recent times and due to its illiquid nature, many new-age investors are moving away from it.
Reits offers these investors an excellent opportunity to invest in the real estate category.
Mutual funds are products like mutual funds through which investors can own income-generating properties such as commercial buildings and office space that they could not otherwise afford to invest in. ??50 lakh in a space, he can still invest in the category via Reits, âsaid Pankaj Kapoor, founder and CEO of Liases Foras. In addition, the liquidity factor is excellent.
Although globally it is a popular form of investment, in India it is still nascent. âSo that way the risks are still unknown,â said Harsh Roongta, Founder Fee Only Investment Advisers LLP, an investment advisory firm registered at SEBI.
Here are the two factors to consider if you are considering investing in Reits:
Rental income has taken a hit due to the pandemic: Reits is heavily dependent on rental income. In this way, residential spaces are low-yielding assets, on the other hand, commercial spaces offer a return of around 8% which is much better than FD returns, Kapoor added.
âBut there are also risks. All investments are sensitive to macroeconomic factors. During the pandemic, many commercial offices were vacated, office space was reduced. As a result, rental income has taken a hit and yields are falling. “
Do not directly expose yourself to Reits: Invest in Reits through index funds or a small portion of a mutual fund and not gain direct exposure to Reits. Taking direct exposure, especially since liquidity is not yet proven, is not advisable, Roongta added.
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