Capital Market and Securities Authority

REIT is an investment trust that specialises in investing in commercial property.It is a company or security that owns a portfolio of real estate holdings. It is also a company that owns, operates or finances income-producing real estate. REITs invest in income-producing properties, and can be focused on any real estate type, from commercial office buildings, to health care facilities, to hostels for educational facilities, to hotels, to shopping malls, to warehouse for storage facilities and beyond each REIT will generally invest in a specific type of real estate holding.

REIT is an investment trust that specialises in investing in commercial property. It is a company or security that owns a portfolio of real estate holdings. It is also a company that owns, operates or finances income-producing real estate. REIT usually trade on major exchanges like other securities and provide investors with a liquid stake in real estate. Although REIT shares trade like stocks, REITs are more like mutual funds that invest in actual real estate properties or in real estate mortgages. REITs invest in income-producing properties, and can be focused on any real estate type, from commercial office buildings, to health care facilities, to hostels for educational facilities, to hotels, to shopping malls, to warehouse for storage facilities and beyond each REIT will generally invest in a specific type of real estate holding. There two types of REIT which are Equity REITs and Mortgage REITs:

The term EQUITY REIT refers to a corporate entity that is engaged in the acquisition, management, building, renovation, and sale of real estate. This type of real estate investment trust offers the greatest potential of reward and as such tends to be favoured by professional money managers’ .Equity REITs are the most common type, representing about 90% of the REIT market according to the National Association of Real Estate Investment Trusts in US.

While Mortgage REITs represent the other 10% of the REIT market. These structures borrow money at short-term interest rates and lend it to real estate owners and operators, or simply invest in securities. These REITs make money on the interest generated from the loans or investments, and they themselves are sensitive to interest rate swings. Equity REITs actually purchase, hold and manage commercial and rental properties. Though they will finance these properties in many cases, their primary focus is on profits through acquisition and management while Mortgage REITs do not purchase, own or manage properties. They invest in mortgages on real estate properties. Though they have the properties as collateral for the loans in which they invest, the mortgage REIT has no ownership position in the property itself.

Investing in REITs has more pros than cons since it is more liquid, cash flow is generated through from investing in properties, less risky form of investment, the properties are valuable always due to appreciation of the real estate markets compared to costs involved which are maintenance & property upkeep and property tax.