Malaysian Investor - Investment Products

REIT Demystified

How to invest in REITs?

There are listed and non-listed REITs. For listed REITs, you can buy and sell them like listed stocks. There are currently REITs listed on the Bursa Malaysia and investors need to go through a stockbroker to invest in them. Like any listed products on the Exchange, investors should be aware that REITs may trade at a premium or discount to their respective net asset values.

For unlisted REITs, like any other unit trust products, you can buy from or sell to the management company or through other authorised agents.

What is the difference between REITs and property stock/company?

REITs vs. property stock/company

REITs	Property stock/company
REITs is a “fund” or “trust” that invests in real estate and property-related businesses, including property stocks.	Property stocks are shares of companies (property companies) which deal in real estate or property-related business.
An Securities Commission (SC) approved management company manages a REIT. An appointed trustee safeguards the assets for unit holders.	A property company is managed like any other company.
A REIT has a well-defined investment policy and invests largely in a portfolio of income-generating real estates.	A property company owns real estates and is not restricted to carrying on a business in property investment and property development.
The trustee holds the real estates or properties in a REIT portfolio in trust for the REIT investors.	The board of directors, on behalf of the shareholders, will monitor a property company to ensure that its assets are protected and that the company is properly run.
A REIT investor is subjected to management and trustee fees.	An investor of a property stock is not subjected to management or trustee fees.
A REIT has to distribute 90% of its income as distributions.	A property company is not subject to such requirements.
REITs are exempt from income tax. Unitholders pay tax at their respective level.	A property company is subject to corporate tax.

Why should you invest in REITs?

Stable and recurrent income
REITs are driven entirely by recurrent rental income from real estates. It distributes at least 90% of its income to unit holders, thus providing stable and consistent income to unitholders.

Diversification
REITs invest in a variety of real estates at different geographic locations. This diversification strategy reduces the negative effects associated with holding assets in a single location.

Professional management
Professional managers manage REITs and they have the expertise beyond the knowledge of individual investors.

Liquidity
Unlike traditional private real estate ownership, REITs are liquid assets that can be sold fairly quickly to raise cash or take advantage of other investment opportunities. One of the reasons for the liquid nature of REITs is that its units are primarily listed and traded on a stock exchange.

Affordability
Unlike direct property investments, where investors would require a large capital to invest, REITs provide average investors with the ability to invest and diversify their real estate investments without a large capital.

Convenience
Sale and purchase agreements, lawyers’ fees and stamp duties are among the many things real estate investors have to put up with. Through REITs, investors are relieved of such factors.

Comfort of regulations
REITs must comply with the requirements of the Securities Commission Act 1993 , the Guidelines on Real Estate Investment Trusts and the Guidelines on Islamic Real Estate Investment Trusts , which has investor protection as its main objective.