Understanding REITs: An Investment Tool You Should Know

2026-01-04 10:37:45

If you are looking for a way to invest in real estate assets without using a large amount of money, a Real Estate Investment Trust (REIT) is a option that should not be overlooked. Since 2018, REITs have become a popular investment tool among Thai investors. But why do some REITs sometimes deliver good returns, while others disappoint? The answer lies in the details of how they operate and the factors affecting their value.

What is a REIT: Definition and How It Works

REIT or Real Estate Investment Trust is a property fund managed by a dedicated team. It raises funds from investors through the sale of unit trusts, then uses that money to manage various real estate assets such as houses, land, warehouses, hotels, shopping centers, or even communication networks.

Income generated from leasing or managing these assets is paid back to unit holders as dividends. This is why REITs often provide steady and high stable returns.

Why is REIT necessary?

For asset owners with income: REITs offer a way to raise large amounts of capital without selling the assets. This capital can be used to develop new projects.

For general investors: REITs open the real estate market to the public, requiring less capital than direct investment, and provide professional management to oversee the assets.

REIT vs Property Fund: What’s the Difference?

REITs and Property Funds may seem similar, but there are key differences:

Regulations and Management: Property Funds are common mutual funds, while REITs are regulated by the SEC and require approval from the Stock Exchange of Thailand (SET).

Investment Flexibility: Property Funds are limited to approved investment lists and cannot invest abroad. REITs are more flexible and can invest up to 10% of their assets in foreign properties.

Offering and Management: Property Funds are sold like typical mutual funds, whereas REITs are issued and traded like listed company shares, with requirements for diversification and annual unit holder meetings.

For these reasons, Thailand has ceased offering new Property Funds, requiring all new offerings to be REITs instead.

Types of REITs

Classification by Ownership Structure

Freehold REIT: The trust owns the property directly, earning income from rent. The unit value increases as the asset value appreciates.

Leasehold REIT: The trust has rights to use the property but does not own it. The unit value gradually decreases over time and terminates when the lease expires.

( Classification by Investment Type

Direct Investment: REIT owns and manages the assets directly.

Indirect Investment: REIT holds shares in other companies that invest in real estate.

) Classification by Business Type

Existing REITs cover various sectors:

Retail REIT: Manages income from shopping malls, outlets, and department stores.
Residential REIT: Earns from hotels, condominiums, and apartments.
Healthcare REIT: Manages hospitals, health centers, and senior living facilities.
Office REIT: Collects rent from office spaces.
Infrastructure REIT: Earns from communication networks and energy pipelines.

Each type has different dividend mechanisms and risk factors.

What Causes REIT Values to Change?

The value of a REIT comes from two main sources:

First: The value of the underlying real estate itself, influenced by economic conditions, industry development, infrastructure improvements, and ownership type (Freehold vs Leasehold).

Second: Future income streams, which depend on economic health, business confidence, and security situations. For example, if the business is thriving, an Office REIT ###Office REIT### will generate more income and dividends. Conversely, during crises or economic shifts, income may decline.

Strengths and Weaknesses of Investing in REITs

( Strengths

High Liquidity: Easily bought and sold on the SET market like stocks.
Risk Diversification: Adds options to diversify your investment portfolio.
Transparency: Listed, offered for sale, and regulated by relevant authorities.
Steady Income: Provides consistent dividends.

) Weaknesses

Taxation: Dividends are subject to 10% withholding tax or included in annual tax assessments.
Interest Rate Sensitivity: When interest rates rise, REITs often decrease in value as funds shift toward higher-yield assets.

Examples of REITs in Thailand

CPN Retail Growth (CPNREIT): Leasehold REIT managing Central malls, office buildings, and Hilton Pattaya Hotel, with an 8.35% annual dividend yield based on a price of 9.85 THB.

Impact Growth ###IMPACT###: Freehold REIT with assets including four Impact Muang Thong Thani buildings and conference centers, offering a 4.69% annual dividend yield based on a price of 12.80 THB.

WHA Premium Growth (WHART): Both Freehold and Leasehold REITs managing warehouses, with a 7.63% annual dividend yield based on a price of 9.50 THB.

Jasmine (JASIF): Infrastructure fund owning 1,680,500 fiber kilometers, earning rental income from TTTBB, with a 13.73% annual dividend yield based on a price of 6.70 THB.

Summary: When is REIT a Good Choice?

REITs are suitable for those seeking regular income, better than fixed deposit interest, and interested in real estate assets but lacking sufficient funds or time to manage assets themselves.

However, before investing, understand that REITs are sensitive to interest rate changes, involve tax costs, and carry risks depending on the asset type.

Choose a REIT that aligns with your investment goals and risk tolerance to ensure the returns meet your expectations.

View Original

This page may contain third-party content, which is provided for information purposes only (not representations/warranties) and should not be considered as an endorsement of its views by Gate, nor as financial or professional advice. See Disclaimer for details.