In this post I will jot down why this might not be a good time to invest in REITs. And give you reasons I am buying them anyway. ReITs are real estate investment trusts. These are not exactly shares, these are sold in units. There are 3 listed ReITs in Indian markets. Brookfield ReIT, Mindspace ReIT and Embassy Office Parks ReITs. These are all office space based ReITs. I expect to see some rental house based ReITs or some warehouse or database srote house based REITs. USA has ReITs based on various real estate assets.
For all 3 options, the minimum units one need to buy is 200. So, you cannot buy just 1 like any other common stock. As these ReITs collect rents, they will distribute the rental income to all unit holders. They can keep some income for maintenance or acquiring other properties.
So, Is this A Good Time To Invest In ReITs? I believe it could be risky to buy ReITs in India, keeping in mind that oil prices are going up along with inflation. If RBI starts increasing rate, ReITs will come down in price. Why? Because like banks ReITs also take loans and they build properties to earn rental income. If cost of raw material goes up, in this case it is cash, then the margins will come down, that will be one reason of fall. On the other hand the yield on the ReIts might increase, considering the rental income does not go down.
But yet, I am accumulating the ReITs now, because the distribution yield is pretty decent and fairly predictable and at this point I think, the distribution yield is more predictable than the inflation and rate hike by RBI. And to be completely honest, I am buying in staggered manner and not investing the whole capital at one shot. I see possibility of those ReITs to fall further and I would like to accumulate more units when that happens.