In this episode of ‘Mutual Fund Corner’, Mrin Agarwal, Financial Educator & Director at Finsafe India discussed about Real estate investment trusts (REITs) - what they are, how they operate and who needs to consider investing in them.

REITs are basically corporations that own, operate, and finance income-producing real estate. In that way, they are similar to mutual funds - except in place of stocks, where they hold a portfolio of rent-generating commercial properties.

Agarwal said, “A REIT is a pooled investment vehicle that owns, operates, and maybe also finances income-producing real estate assets. These assets could be like, for example, malls, a lot of office properties, it could be hotels, it could be warehouses, it could be medical facilities. So, it could be a whole lot of different types of property assets that are available.”

She added, “REITs cannot own vacant land or mortgages. So, essentially, about 80 percent needs to be invested into completed and income generating assets.”

Talking about advantages of REITs, Agarwal said, “Firstly, it is a good instrument to get a regular and stable return. Secondly, it is easier way for individuals to invest into real estate. Lower amounts can be invested versus physical properties. Thirdly, it is highly liquid. You can exit from it at any point in time and much better than actually holding the property directly. The biggest advantage is that you are getting inflation adjusted returns and returns are not that volatile.”

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