Investment in reits in India: Warren Buffett’s opinion and your benefits

New Delhi. Warren Buffett, one of the most successful investors in the world, always walk away from Real Estate Investment Trusts (Reits). His company Berkshire Hathaway has negligible stake in the portfolio of Hathway. But this does not mean that reits are also useless for you. In fact, in today’s environment, reits can be a sensible option for your portfolio – especially if you are investing in India.

Buffett and his partner Charlie Mangar have always invested in a business where he saw “Competitive Advantage” i.e. competitive lead. In the real estate market, according to him, there is no such edge because this sector is already quite compatible and efficient. In addition, Berkshire Hathaway is a C-Corporation, on which a double tax is levied on real estate or reit income-first at the company level and then at the shareholder level. This ends tax efficiency, which is considered to be the biggest feature of reits.

Dividend Tax Free: If the Underling Company (SPV) of Reit has already paid corporate tax, then the dividend tax-free received by investors is.

Capital Gains discount: If you have kept the Reit Units more than 1 year, then only 10% tax is levied on profits above ₹ 1 lakh. Keeping for less time is 15% tax.

90% distribution mandatory: SEBI rules reits to distribute at least 90% of their net distributable income to divide investors, which guarantees regular income.

The ‘useless’ for buffett, is ‘beneficial’ for you

Reits for big institutional investors like buffett may be unattractive due to insufficient returns and tax problems, but for an Indian retail investor, they present a combination of low risk, good income, and better liquidity. Reit units can be purchased and sold on the stock exchange like a normal share. Also, GST does not have any direct impact on income and TDS also applies to a limited level.