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Amid lack of funds for investment in the real estate market and housing shortage being major areas of concern, Real Estate Investment Trust (REIT) has the potential to address these twin challenges faced by the sector, according real estate consultancy firm Knight Frank.
A REIT is a company that directly owns income producing real estate assets and provides a trading mechanism to investors. "REIT has the potential to emerge as an answer to these twin challenges of the real estate sector. One, it can address the housing shortage and second it can enable an individual to
Lack of sustained financial options has been the most critical challenge for the sector, which has contributed to the shortage of fresh supply of houses and also responsible for high property prices.
At the same time, though real estate is amongst the largest mainstream asset classes for investment, high value of the property prohibits an individual investor from participating in this asset class, he said.
"On one hand an institutional market of REITs can ensure steady supply of capital to real estate development which shall aid in increasing the supply of houses and on the other it shall serve as an investment vehicle for individuals," he said. Some of the REITs promoted by Indian real estate developers include Unitech Corporate Park, Hirco and Ishaan Real Estate which are listed on the London Stock Exchange.
While Indiabulls Properties Investment Trust is listed on the Singapore Stock Exchange. "Going forward we expect stakeholders to take cognisance of the opportunities offered by the REIT structure of direct investment in real estate. As a result, the REIT mode of investing in real estate should emerge as the most preferred way of participating in the promising real estate asset
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