REITs to advance and reclaim ground

Both India and Kenya has considered allowing real estate investment trusts in its markets and a positive decision on that might be forthcoming soon.

Emerging property markets are looking at real estate investment trusts as a way of increasing investor interest. A real estate investment trust allows even small investors to buy into prime properties, and this is exactly why India is looking to allow REITs to operate in the country.

The REITs will be allowed within the financial markets once India has implemented a new stock lending and borrowing program. The Securities & Exchange Board of India is working with Indian government and the central bank to introduce currency futures.

The goal is to increase the range of financial instruments available to protect investors from severe fluctuations in the exchange rate. The Indian market is in need of growth and the new exchange products are seen as tools necessary to accomplish this.

Real estate investment trusts will be introduced once these measures have been implemented. Overseas investors have made many predictions regarding the future of the Indian property market. By allowing REITs in the financial markets, India is sure to boost the market. Additional details will be made available shortly.

Typically the introduction of property investment funds and REITs promotes a major shift in the market. Instead of real estate investors acquiring land and then financing the development through bank loans or personal capital, allowing several investors come together in a trust or fund increases the buying power.

Kenya also hopes that REITs become a vehicle of wealth for sophisticated investors. Investors will be able to buy into prime properties and reap the rewards of investing in an emerging market. REITs make it possible for capital to flow into commercial real estate. Caution is needed.

The most important factor that should be considered before investing in an REIT is the trusts track record. Coming into an emerging market it isn't unheard of for lesser known REITs to make inflated promises only to disappoint investors. Research as to the trusts investment goals, diversification and dividend policy should be thoroughly researched.