Wealth Guide: REITs, INVITs - How to make money with Real Estate and Infrastructure Investment Trusts - Expert explains

Wealth Guide: As the saying goes, there is no easy money in this world, you must make effort to make money. However, the difference lies in the type and quality of these efforts. One can work hard and make a little money. However, another one can make some smart moves and make a fortune. In real estate investments too, it is possible to make money via smart tools and instruments. Nakul Mathur, MD, Avanta India, shares his knowledge on Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts, and explains how to how to make money with them.

Invest in Real Estate Investment Trusts (REITs)

"Although a newer phenomenon in the Indian subcontinent, REITs are in the market for a long time now. For the uninitiated, a REIT is usually a large company which owns and manages large income-generating real estate. These real estate properties can be hospitals, warehouses, large office spaces, shopping malls, hotels and commercial properties of different kinds," Nakul Mathur said.

"As a smart investor, you can invest in these REITs with a small amount and can earn from the rental income generated by the managing bodies. Each investor gets a return based on his/her investment. This way, even without owning a property, you can earn from the real estate sector," Mathur adds.

"Moreover, REITs can be traded on the stock market like every other equity share of the company. The REIT provide the benefit of faster liquidation than traditional properties. Although the share of retail investors is minimal as of now, it is expected to grow in magnitude in the coming years," he further suggested.

Infrastructure Investment Trusts (INVITs)

He explains, "Very similar to REITs, retail investors can also invest in Infrastructure Investment Trusts or INVITs. Infrastructure Investment Trusts are large companies which own and manage operational infrastructure projects and earn from the income generated from these assets. In simple words, INVITS are pooled investment vehicles like Mutual funds."

"They invest the sum accrued into highway projects, power plants, airports, transmission lines and large scale pipeline projects etc. In addition to this, INVITs are designed and managed in such a way that 80 per cent of the investors’ money is invested in revenue-generating and completed projects. This mitigates the risk associated with under-construction projects," he said.

"The INVITS present an excellent opportunity to earn from large infrastructure projects without owning one. Moreover, retail investors can start with a small sum and keep on increasing it. This method does away with the hassle of owning a property and maintaining it," he added.

Real Estate Stocks

"One of the most popular ways of taking advantage of the growth in the real estate market is to invest in a pool of real estate stocks. Although the direct investment in stock poses a high risk, a growing market also presents an opportunity to earn a handsome return in long term. If you are wary of investing in the stocks directly, you can choose a thematic mutual fund which focuses on the real estate market. Here, a pool of top real estate companies will be targeted and your money will be exposed to the real estate market. The Mutual fund way of investment also minimizes the risk as the differential performance of various players normalizes the returns," he suggested.

Long Term Lease

"This option is only feasible when you already own a property. Instead of giving it on a shorty term rent, a long term lease will remove the hassle of rental agreement renewal and you will enjoy the rental returns for a lifetime. Large offices, factories and commercial spaces prefer to lease as it is convenient for both investors as well as the owners. One-time documentation, strict lease terms and availability of legal recourse make the lease an attractive proposition. Conclusively, through the above-mentioned ways of investments, you can earn from the real estate sector without owning a property," he concluded.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)