CVK is planning to incorporate Real Estate Infrastructure Investment Trust (REIT) which is similar to mutual funds. While mutual funds provide for an opportunity to invest in equity stocks, this allow one to invest in income-generating real estate assets.
CVK plans raise funds from a large number of investors and directly invest that sum in income-generating real estate properties (which could be offices, residential apartments, shopping centers, hotels and warehouses).
REITs are structured as trusts, which are listed in stock exchanges for investors to buy units in the trust.
The investment objective of REITs is to provide unit holders with dividends, usually generated from rental income and capital gains from the profitable sale of real estate assets. CVK plans on distributing 90 per cent of its income among its investors by issuing dividends.
In order to attract investors, the dividend distribution is tax on REITs is exempted by the government of India.
Indian commercial real estate is estimated to offer investment opportunities worth Rs, 2.88 lakh crore – Rs. 3.60 lakh crore across top cities.
This provides investors who are averse to investing in physical purchase of property due to the risks involved, an alternative. Investors can purchase units of REITs which are traded on the stock exchange, as against physical purchase of property. Therefore, investors can buy and sell units of REIT on the stock exchange as and when required, making investment easier to liquidate compared to physical property transaction.