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CS Professional · Strategic Management and Corporate Finance · Real Estate Investment Trusts

Which statement best describes the basic concept of a Real Estate Investment Trust (REIT) in India?

A REIT is a trust that collects money from investors, invests it in income-generating real estate, and distributes the bulk of the rental and other income to unit holders. It is a pass-through investment vehicle, unlike a land-trading company or an equity fund.

  1. AA trust that pools money from investors to own and operate income-generating real estate and distributes most of the rental income to unit holdersCorrect
  2. BA company that trades in land plots and keeps all profits as retained earnings for future development
  3. CA mutual fund scheme that invests mainly in listed equity shares of construction companies
  4. DA bank-sponsored deposit scheme that lends money to home buyers at fixed interest

Explanation

A REIT is a trust that pools investor money to hold income-producing real estate and passes on most of the income to unit holders. It is not a trading company, an equity mutual fund or a deposit scheme.

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