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Will REITs make a comeback after COVID-19?

Investors in the IPOs of REITS have gained anywhere between 9-14 percent in total returns since the IPO listing. This is below expectations, but COVID-19 and the Work-From-Home practice it triggered spoiled the party. Now that COVID-19 is on the wane, will REITs rebound?

December 05, 2022 / 11:59 AM IST
All the three listed REITs in the Indian equity markets are down 14-16 percent from their 52-week highs (Representative Image)

All the three listed REITs in the Indian equity markets are down 14-16 percent from their 52-week highs (Representative Image)

Real Estate Investment Trusts, or REITs, were billed as the ideal fixed income alternatives when these securities appeared in the Indian capital markets over three years ago. But the recent under-performance of listed REITs has cast a shadow of doubt on the viability of this investments for individual investors.

All the three listed REITs in the Indian equity markets are down 14-16 percent from their 52-week highs.

REITs are structured as trusts that own and operate property with the objective of generating a rental income or yield. The REIT entity is listed on stock exchanges, similar to any company’s shares and the income (rentals, at least 90 percent) made from properties held by the REIT is distributed to investors who hold these REIT units as interest and dividends.

Given that rentals are a visible, steady income and ideally REIT properties have long-term leases with their vendors, this type of income is considered stable and semi-fixed.