Blackstone-backed Embassy Group will launch India’s first Real Estate Investment Trust (REIT) next week and is looking to raise about Rs 5,000 crore from the market via REIT.
REIT is a company that owns and operates income-producing real estate. It resembles a mutual fund but the underlying asset here will be a real estate asset.
In terms of a real estate asset, it could be commercial buildings like an office or a hotel. These are the places where a REIT would invest the money that they take from the unit holder. However, just like mutual fund units, one will be given units from REIT.
Retail investors can also invest in REIT but the minimum amount is about Rs 2 lakh. Also, there are rumors that if any of the REIT stocks get listed on the exchanges then they might reduce the minimum amount to Rs 1 lakh.
About 80 percent of the proceeds that REITs get have to be invested in complete or revenue generating projects while the remaining 20 percent has to be in developing properties.
Rental yield from commercial property is in the range of 7-9% while the capital appreciation is in between 4-7% in the long term.