Right Time For REITS

A REIT is a company that owns, operates or finances real estate, and it produces rental income and provides an investment opportunity, like a mutual fund

Right from the start of the year, we are witnessing heightened volatility in the equity market that is continuously sliding down. The key equity indices are already technically in a correction mode as they are down by more than 10 per cent from their recent peak and year till date they are down by almost 8 per cent as of March 4, 2022. There are various reasons for such a fall in equity prices. However, the dominating one is higher inflation and the current geopolitical uncertainty that is once again fuelling commodity prices and adding to inflation.

Nonetheless, there are a few pockets within the equity market that are generating positive returns. One of them is the Real Estate Investment Trusts (REITs). In India there are three REITs. These REITs have generated return in the range of 2-10 per cent from the start of the year compared to BSE 500 which has been down by 6.2 per cent in the same period. This means an outperformance or alpha by these REITs in double digits.

What are REITs?

A REIT is a company that owns, operates or finances real estate, and it produces rental income and provides an investment opportunity, like a mutual fund. This lets investors benefit from valuable real estate and get dividend-based income and returns. REITs also help provide capital appreciation. Similar to other industries, REITs can be private organisations, public but non-traded, or they can be publicly traded on a stock exchange. By being publicly traded, REITs are similar to mutual funds that are accessible to all investors, who can benefit from receiving real estate income without purchasing, managing or financing property directly.