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Real estate investment has been an important part of financial planning for generations. However, due to comparatively lower returns in the recent times and due to its illiquid nature, many new-age investors are moving away from it. 

Reits brings in an excellent opportunity for such investors to invest in the real estate category. 

Reits are products like mutual funds through which investors can own income-generating properties such as commercial buildings and office spaces which they otherwise can’t afford to invest in. “For example, may be the investor does not have the capacity to invest 50 lakh in a space, he can still invest in the category through Reits," said Pankaj Kapoor, Founder and Managing Director, Liases Foras. Plus, the liquidity factor is excellent. 

Though globally it is a popular form of investment, in India, it is still nascent. “So, that way risks ate still unknown," said Harsh Roongta, Founder Fee Only Investment Advisers LLP, a SEBI registered Investment Advisory Firm. 

Here are the two factors you should look into if you are planning to invest in Reits: 

Rental income has taken a hit due to pandemic: Reits is highly dependent on rental income. In that way, residential spaces are low yielding assets, on the other hand, commercial spaces provide around 8% returns, which is much better than FD returns, Kapoor added. 

“But there are risks also. All investments are susceptible to macroeconomic factors. During the pandemic, many commercial offices were vacated, office space were reduced. Due to this, rental income has taken a hit, and yields are coming down."

Do not take direct exposure in Reits: One should invest in Reits through index funds or a small portion of a mutual fund and not take a direct exposure in Reits. Taking direct exposure, especially since the liquidity is not proven yet, is not advisable, added Roongta.

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