Investor Corner/The asset classes/Real Assets: REITs, InvITs and Gold
2.5.3 REITs & InvITs vs Physical Real Estate
Physical real estate carries high transaction costs, low liquidity and concentration risk. REITs and InvITs offer professional management, a much smaller minimum ticket size and daily liquidity, but without leverage or direct control over the asset.
The genuine advantages of the listed structure
Buying physical property typically involves stamp duty, registration charges and brokerage that together can run into several percentage points of the transaction value, along with an illiquid, often lengthy process to eventually sell. A REIT or InvIT unit can be bought or sold on an exchange within seconds, at a small fraction of the transaction cost, while still providing exposure to the same broad category of income-generating real assets.
What is genuinely given up in exchange
Direct property ownership allows for leverage through a mortgage, personal control over management and improvement decisions, and in the case of a home, personal use of the asset itself. A REIT or InvIT investor gives up all of this in exchange for the liquidity, diversification and lower ticket size the listed structure provides.
How the two can fit together
Many investors hold both: a primary residence or a small amount of direct property for personal use or specific goals, alongside REITs or InvITs for liquid, diversified exposure to the broader real estate and infrastructure asset classes without the operational burden of direct ownership.
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