Why REITs Are a Popular Way To Invest in the Singapore Real Estate Market

| August 22, 2013 | 0 Comments

singapore reit investment In Singapore, property is one of the most popular assets that Singaporean investors like to place their money in. From an overall point of view, the reason behind this is simple. Property investments are naturally protected against inflation and they are also tangible which uniquely distinguishes them from other types of similar assets. Not only can there be capital gains, property investments can also be rented out in order to provide a consistent monthly income as well.

However, not every investor has the means to invest his or her money in assets as expensive as property. Even buying a flat or a condominium with the sole purpose of making a good investment requires a lot of financial capital. In Singapore, the government issued a set of measures that have also cooled the growth of the real estate market.

Nevertheless, since the market is something that makes financial sense for investors to invest in, Real Estate Investment Trusts (REITs) come into play. One of the main reasons why REITs are popular is due to the fact that they allow small time investors to take advantage of the real estate market. Practically speaking, a REIT basically allows a group of investors to pool in their money to invest in a number of real estate ventures, and enjoy the rental income and capital appreciation from the properties under management.

A REIT not only allows investors to diversify their risk, but it also enables individuals to invest money in real estate properties such as shopping malls and even hospitals. The rental income that is derived from a shopping mall or any other similar type of asset is much higher in value as compared to a residential unit. Since the financial benefit of REITs to investors is mostly based on the level of rental income that can be derived from them, such real estate properties are quite attractive from an investment point of view.

REITs have certain rules which are used to regulate their trade processing within the market. One of the greatest benefits associated with REITs is that they can be traded like stocks within the stock exchange. In Singapore, the government has stipulated that every REIT has to use 90% of its income to provide dividends to its shareholders as well as the fact that 75% of that income has to originate from rents. Moreover, an REIT has to invest 75% of its total asset worth in real estate properties at least, and has to have a 60% debt-to-asset ratio if it possesses a credit rating. If the particular REIT does not have a credit rating, the debt-to-asset ratio must go down considerably to 35%. The main purpose behind this protocol is to ensure that over-leveraging does not become an issue.

Category: REITs

About the Author ()

John Tan has been Vice President of BlueTrust Investments Corporation for 6 years since the mid-90’s. He has since moved on, to be a professional full-time trader.

Leave a Reply