What are the three types of REITs?

Real Estate Investment Trusts(REIT) have become a popular way to invest in the Real Estate sector, though Pakistan still has a lot of catching up to do. We already covered 4 reasons why you should invest in REITs.

However, when it comes to REITs, not all of them are the same. Knowing the difference is important.

One can categorize them into three different categories. Let’s briefly go over each one.

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Rental REITs

The purpose of a rental REIT is to generate income by receiving rents from the underlying properties.

The REIT management can then decide to pay out this rent to the shareholders.

In Pakistan, REITs can avoid paying corporate tax if they payout at least 90% of their earnings to shareholders. Because of this reason, dividends are almost guaranteed.

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In the PSX, Dolmen City REIT (DCR) is a form of rental REIT.

Developmental REITs

Developmental REITs are focused on growth and are also sometimes called construction REITs or Growth REITs.

They focus on buying undeveloped or underdeveloped properties and work on them to increase their value. Investors gain when the property is either sold out or turned into an income-generating asset.

In the PSX, Global Residency REIT (GRR) is a for of developmental REIT.

Hybrid REITs

Hybrid REITs are a combination of both rental REITs and developmental REITs.

They offer investors the opportunity to invest in both income-generating assets and value-appreciating assets through one company.

In the PSX, TPL REIT Fund is a form of hybrid REIT.

⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →