India’s first Real Estate Investment Trusts (Reits) and Infrastructure Investment Trusts (InvITs) Index was recently inaugurated by National Stock Exchange Indices Ltd, a branch of the National Stock Exchange of India. This significant development has been in the public eye as it signifies an essential step forward for the investment sector in the country.
About the Nifty Reits and InvITs Index
The key purpose of this newly introduced index is to monitor the performance of Reits and InvITs that are openly listed and actively traded on the National Stock Exchange. The index assigns weights to securities based on their free-float market capitalization. However, there is a limit to how much weight a security can hold, with a cap of 33% each security. Furthermore, the cumulative weight of the top-3 securities is restricted at 72%. With a base date of 1 July 2019 and a base value set at 1,000, the index will undergo review and rebalancing every quarter.
Top Constituents of the Nifty Reits & InvITs Index
Notable constituents of this index include Embassy Office Parks Reit, Powergrid Infrastructure Investment, Mindspace Business Parks Reit, and India Grid Trust. The index distributes its weight as follows: 57.5% is assigned to real estate, 35.6% to power, and the remaining 6.8% to services.
Understanding Infrastructure Investment Trust
Infrastructure Investment Trust, also known as InvITs, functions like a mutual fund allowing direct investment of money from individual and institutional investors into infrastructure projects. The return for the investors is a part of the income generated by these projects. Functions under the regulations of the Securities and Exchange Board of India (SEBI), InvITs can be listed on exchanges through Initial Public Offering (IPO) just like traditional stocks.
What is a Real Estate Investment Trust?
A Real Estate Investment Trust (REIT) is an establishment formed with the primary objective of funneling investable funds into various fields of real estate, including operating, owning, or financing income-producing properties. REITs are designed on the principle of mutual funds, offering investors a highly liquid option for investing in real estate. REITs function as a type of security that caters to a broad spectrum of investors, whether large-scale or not. It allows for steady income, diversification of portfolio, and long-term capital appreciation. REITs also have the option to list themselves on a stock exchange. In India, SEBI introduced REITs in the year 2007.
About SEBI
The Securities and Exchange Board of India (SEBI) was established on 12th April 1992, in accordance with the provisions of the Securities and Exchange Board of India Act of the same year. SEBI holds a significant role in protecting the interests of investors in securities and regulating the securities market in India.
