All about REIT

Mar 02, 2017 Share

Wondering about how REIT works? This post will provide you with some valuable insight about the same. Classified into two categories namely Equity REIT and Mortgage REIT, Real Investment Trust (REIT) is a venture that capitalizes the real estate sector to a great extent. It not only helps the home buyers invest in the A-grade properties, but also facilitates the shareholders with owning stocks. With this, the stockholders of REIT can now have a split of the income yielded from real estate investment.

However, each and every real estate company cannot qualify as an REIT; in order to be eligible for the same, a firm must be in the agreement to reimburse at least 90% of its assessable profit. Avoiding corporate income tax, the companies having REIT status simply share out all the profits and tend to miss out the taxation, when the other ventures are liable to pay taxes on its entire turn-over and then, divide its after-tax revenues between dividends and reinvestment.

The criterions that will make a company make up for REIT are as follows-

  • It has to obtain 75% of its gross income from the property rents
  • It has to put in 75% of its total assets in real estate
  • It has to be administered or supervised by a board of directors
  • It has to have at least 100 shareholders
  • Last but not the least; it has to shell out 90% of its taxable income as shareholder surplus each year

Moreover, after RERA will come into effect by May, 2017, the consumers are not only expected to draw in a number of benefits, but this significant move is also presumed to elongate the working capital cycles to a significant extent. However, the builders are also likely to hold back the new launches till final execution. There has also been a considerable shift in market share for both the organized as well as the luxury segments. When the developers are quite strict on putting a ceiling on the launches to pass the required stocks for ongoing projects, the commercial sector is also quite optimistic with the sanguine hikes.

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