INTRODUCTION: REITs or Real Estate Investment Trust can be described as a company that owns and operates real estate to generate income. REITs pool the capital of numerous investors. This makes it possible for individual investors to earn dividends from real estate investments—without having to buy, manage, or finance any properties themselves. REITs invest in most real estate property types, including apartment buildings, cell towers, data centers, hotels, medical facilities, offices, retail centers, and warehouses.  
HOW DOES A COMPANY QUALIFY AS A REIT?
To qualify as a REIT, a company has to meet specific requirements as mentioned below:           TYPES OF REIT:

• Equity REITs: Equity REITs are the most common type of REIT. It invests in and owns income-producing real estate properties. These properties can include commercial properties or office spaces. The revenue generated is generated by rentals and sale transactions, which are distributed to the shareholders as dividends.
• Mortgage REITs: Mortgage REITs, also known as MREITs, are basically involved in lending funds to real estate companies. It earns income through interest payments, which are distributed to the shareholders.
• Hybrid REITs: Hybrid REITs offer the combined benefits of Equity and mortgage REITs. They invest in both physical properties and real estate debt instruments. It helps you to diversify your investment across debt and equity. It offers two types of income: rent income and interest
• Publicly Traded REITs: Publicly traded REITs are listed on the National Stock Exchange (NSE) and are also registered with the Securities and Exchange Board of India (SEBI). Buying and selling these REITs’ shares through the stock exchange makes them a highly liquid investment. However, it’s essential to consider that, like any publicly traded security, they are exposed to market volatility.
• Public Non-Traded REITs: These are the same as Publicly Traded REITs but are not listed on any stock exchange. They are also registered with SEBI, but one cannot buy or sell these REITs online; hence it has lower liquidity. Buying and selling shares takes place directly through the REIT Company itself or through secondary markets established by broker-dealers.
• Private REITs: Private REITs are not listed on the stock exchange and are also not registered with the SEBI. They are often only made available to the selected investors and have less liquidity than publicly traded REITs.

TAXATION OF REIT:

• Taxation of Dividends: As per current rules, dividends obtained from REITs are completely taxable in the hands of the investor. Dividend pay-outs from REITs are included in the annual income of the investor and taxed according to the investor’s slab rate for the applicable Financial Year.
• Taxation of Capital Gains: Capital Gains from the sale of REITs units are covered by Short Term Capital Gains (STCG) and Long Term Capital Gains (LTCG) applicable to equity investments. STCG is applicable if the holding period of units is 1 year or less from the date of unit allocation. The STCG tax rate is 15% of capital gains obtained from the sale of units. If the holding period exceeds 1 year from the date of unit allocation, LTCG taxation rules are applicable. The LTCG tax rate is 10% of gains in excess of Rs. 1 lakh (across all equity investments for the applicable FY) with no indexation benefit.
• Taxation of Capital Gains for International REIT Fund of Funds: If Capital Gains are obtained from the sale of units of International REITs Fund of Funds, non-equity Capital Gains taxation rules are applicable. In this case, Short-term Capital Gainsare applicable if the holding period is 3 years or shorter (calculated from the date of unit allocation). STCG in this case is as per the applicable slab rate of the investor for the FY. LTCG tax is applicable on units held for over 3 years calculated from the date of unit allocation and is 20% of indexed Capital Gains. Next, let us see how you can invest in REITs.

PROS AND CONS OF REIT:  PROS 

1. 1.Allows diversification in portfolio
2. 2.Potential for capital gains
3. 3.Stable cash flows through dividends
4. 4.Accrues risk-adjusted returns
5. 5.Transparency in dealing

 CONS 

1. 1.Low growth prospect
2. 2.Dividends earned through REITs are taxable
3. 3.Market-linked risks
4. 4.Potential for high management and transaction fees

CONCLUSION: In conclusion, Real Estate Investment Trusts (REITs) offer investors a unique opportunity to benefit from the real estate market without the need for direct property ownership. These investment vehicles aggregate money from numerous investors to buy and manage a variety of income-producing real estate assets, including retail spaces, apartment buildings, and more. REITs provide a bridge between traditional real estate investing and the financial markets, offering individuals the chance to participate in the potential rewards of real estate without the burdens of property management. However, potential investors should conduct thorough research, consider their financial goals, and consult with financial advisors to determine if REITs align with their investment strategies and risk profiles. As with any investment decision, understanding the nuances of REITs and their associated benefits and challenges is crucial to making informed choices in building a well-rounded investment portfolio.