Retirement Corpus planning with REITs and InvITs in India.

Why are these instruments a favorite for such investors?

It is a known fact that REIT and InvIT investments are a favorite of pension funds like the Canadian firm, Brookfield or the Singapore Pension fund, GIC. Here we explore the reason for the same. The Canada Pension Plan Investment Board (CPPIB) has invested in Embassy REIT, GIV has invested in indigrid InvIT and Brookfield has even come out with its own REIT in 2021. The reasons for their preference of REITs are explored below.

1) Understanding what these investors seek: Investors seek regular cash-flows. They also wish to protect their capital over time as one of the biggest fears is inflation eating into capital.

2) Identifying disadvantages/ shortcomings of a typical corpus fund yielding interest (debt investing): Longevity may prove to be a bane for these individuals as capital gets eroded or the inflation makes their cash flows inadequate.

The advantage offered by REITs counter the above problems. This advantage is inherent in the way REITs assets perform and REIT compliance with regulatory requirements. REIT assets generate high and increasing regular rental return. Additionally, the appreciation from underlying property happens over long time-frames to accommodate changes in the purchasing power of money. All these features are captured in the units offered by the REITs which the investors hold in their portfolios, making REIT investments an excellent choice for retirement planning.

A more detailed understanding of the above can be gathered from the write-up titled “Investment Planning with REITs”.