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Real estate stocks see upward surge as RBI allows REITs

Major real estate corporates witnessed a surge between 1% and 6% following the Reserve

Bank of India’s decision to allow banks to invest in real estate investment trusts (REITs) and infrastructure investment trust (InvITs). This move, undertaken by the RBI at a request from market regulator SEBI, is expected to attract more institutional investors towards real estate and infrastructure firms and will free up capital and lower costs for realty firms. Further detailed guidelines will be issued by the central bank by May-end. As a result of the move, firms like DLF, Sobha, Prestige Estates, Unitech and Godrej surged between 1% and 6%. What are REITs? REITs work in a manner similar to mutual funds except that they issue units to their investors. The money is invested in completed commercial projects that are expected to generate returns. The REIT is expected to be registered and to raise funds via an IPO. REIT units are listed on exchanges and traded just like securities. REITs do not pay income tax as long as they pay out 90% of their earnings to shareholders in the form of dividends.
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