Real Estate Investment Trusts (REITs) offer investors exposure to real estate properties through a JSE-listed instrument. Property loan stock companies and property unit trusts, listed on the JSE have been converting into REIT structures since April 2013.
Who is this for?
Investors who want exposure to the property market without the large initial capital outlay.
- Must pay at least 75% of their taxable earnings available for distribution out to investors as dividends, giving investors certainty that net income will be paid out.
- Earn their income from property leases, which means that they usually have a relatively stable income stream, which is adjusted upwards annually to keep pace with inflation.
- Earn their income from commercial properties with long lease periods, which means that they usually have a relatively stable income stream, which is adjusted upwards annually to keep pace with inflation.
- Are required to have a committee to monitor risk.
- Investors may face some degree of risk because economic and social situations are unpredictable and may positively or negatively impact rental income and the price of REITs.
- Foreign shareholders of SA REITs will be levied a dividend withholding tax from 1 January 2014. The current rate is 15%; or the applicable double tax agreement rate could apply.
- Gives the property company enhanced tax efficiency as tax is payable by the end investor.
How to get REITs
Open an account with an authorised JSE Equity member to buy or sell REITs.
Ordinary Shares are the most common type of Shares traded on the JSE’s Equity Market.
Exchange Traded Funds or ETFs are listed investment products that track the performance of a group or "basket" of Shares, Bonds or Commodities. These "baskets" are known as indices.