REITs Help Diversify Portfolio, Earn Dividend Income, Says Embassy's Ritwik Bhattacharjee
A REIT offers a combination of growth and consistent dividend through which investors can earn rental yield as dividend and participate in capital appreciation.
Real Estate Investment Trusts, or REITs, are a good investment option to diversify a portfolio that offers a unique combination of growth and a consistent dividend, according to Ritwik Bhattacharjee.
"People should think of a REIT as a high-dividend-paying stock run by a company that invests in commercial real estate," the chief investment officer at Embassy REIT told NDTV Profit.
He explained that a REIT offers a unique combination of growth and a consistent dividend, through which investors can earn a rental yield as a dividend and participate in capital appreciation.
"A REIT owns commercial properties, takes the rent and adjusts for financing, maintenance, interest costs, and taxes, and then pays off the rest as distribution (to investors)," the fund manager said.
Such instruments provide diversification of portfolios to investors and allow them to own a share of real estate without actually buying them. It is a liquid asset, unlike physical real estate, and "a great product" for regular income seekers, he said.
"REITs are very safely and prudently capitalised and managed and cannot have more than 49% of our value in debt. It is a wonderful investment for professionals... It's designed to know where rents are coming from," he said.
As per regulatory norms, he explained that a REIT has to pay out 90% of its cash flow to unitholders, and 80% of its portfolio has to be in rent-generating assets. It also cannot own residential property and empty land plots.
Bhattacharjee said Embassy, which has been a listed company for nearly five years, runs a 45 million-square-foot portfolio of office space, anchored largely in Bengaluru. "We have leased over 10 million square feet and paid out close to Rs 9,000 crore of distribution to unitholders."
The portfolio also comprises strategic amenities, including four operational business hotels, two under-construction hotels, and a 100 MW solar park supplying renewable energy to tenants, according to the company's website.
The views and opinions expressed by the investment advisers on NDTV Profit are of their own and not of NDTV Profit. NDTV Profit advises users to consult with their own financial or investment adviser before taking any investment decision.
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