Real estate investment trusts (REITs), which invest in publicly traded real estate, have long been a component of well-diversified portfolios. Over the long run, REITs have provided competitive risk-adjusted returns, attractive income, and inflation protection in a variety of market conditions.
However, given the structural difficulties that are wreaking havoc on sectors such as office space, regional malls, and retail centres, some are questioning whether REITs are still a worthwhile investment. We believe that the changing makeup of the REIT industry will contribute to the preservation of these features.
A stronger, more resilient REIT industry emerged as well, headed by management teams that learned and applied many useful lessons, not least about balance sheet strength and structure. However, because of the pandemic’s socioeconomic impact, restoring purchaser interest in even selling existing inventory proved difficult.
Traditional assets retain their allure. Owning a home is arguably the only investment that most risk-averse investors might pick over equities markets that may promise significant long-term returns while avoiding the hazards associated with stock markets.
Many dual-income couples that have been investing in more than one property to diversify their high-yielding asset portfolio are now considering equity markets, whether through mutual funds or stock trading, as a possible way to maximize their wealth. There are also Real Estate Investment Trusts for those who want to combine the best of both worlds (REITs).
While India only introduced REITs in 2007, they have been a global investment focus for over 50 years. The government has helped Real Estate Investment Trust (REIT) investors in the country by making regulatory changes that allow them to invest their money more efficiently and also contribute their international knowledge in REIT management.
The existing REITs in India have previously demonstrated that they are excellent quality investments for those seeking long-term financial gains. They have a greater chance of avoiding fraud because it is overseen by the Securities and Exchange Board of India (SEBI) and they report their capital portfolio every six months.
According to data from JLL’s ‘The India REIT Opportunity’ research published in November 2020; the current REITs in India represent a significant investment opportunity. Based on the 735 Cr investment expected in 2020, it also implies that fund managers choose REITs over Infrastructure Investment Trusts (InviTs).
The fact that net absorption of real estate was relatively significant even during the pandemic-stricken year of 2020 demonstrates that REITs are heating up as a destination for investment. There are also significant indications that net absorption may exceed 30 million square feet in 2021.
As we approach the new normal, REIT investments are proving to be more beneficial to investors in emerging countries such as India than to those in developed markets. This will result in increased national and international investments, bringing world-class infrastructure and management to our doorstep.
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