Real estate investment trust known as REIT is almost similar to a mutual fund investment, except that here you invest in income generating real estate assets. This Trust collects funds from different investors who can invest in smaller amounts in a real estate property and once the trust gets back ROI it distributes the profit to the investors as per their principal amount invested.
In REIT you can only invest in completed and approved real estate properties, and the returns depend on the appreciating value of the real estate asset. Hence all terms and conditions are listed down by the various governing bodies to keep it regulated, and the investors are also well informed and clear about where they are investing before even deciding to invest their hard earned money.
REIT can raise funds through an initial offer and gradually raise it through follow-up offers once it’s listed. Just like other REITs around the world, Singapore REITs also have the minimum amount of subscription depending on different rules and regulations set by governing body the Monetary Authority of Singapore (MAS), which is the body with a mandate to set rules and guidelines for the Singapore REIT sector.
How has REITS impacted the market?
- Formation of REIT has helped the investors as well as the struggling developers who are looking out to reduce their debts.
- The investors who are genuine but cannot invest huge amounts get an opportunity to invest smaller amounts where they get ROI and feel that their investment is secure and full proof.
- With time it is estimated REIT will help to make the investment market more liquid and mature regarding more investors coming in into the field.
- REIT has helped to make the transactions as transparent as possible as the investor is well informed about where and how they are investing, and they can analyze what return they can expect.
- The properties are well investigated, and a proper report is submitted before they can qualify to be included under REIT. Thus the chances of any fraud are nullified here.
And the most important factor to consider here is REITs are given “pass through” status by the income tax department hence it’s not the trust but the beneficiary investors who earn the income out of their investment have to pay the tax. Thus, REIT has helped to regulate real estate market to a lot of extents and a regular improvement is expected in coming days.