REIT – which is Real Estate Investment Trust, refers to a tax designation for a corporation making investment in real estate that decreases or removes corporate income taxes. In return, it is required that REIT distributes 90% of their income (which could be taxable) into the investors’ hands. The structure of REIT was created to make available, a similar structure for investment in real estate since mutual funds provide for investment into stocks.

REITs could be privately or publicly held just like other corporations. Public REITs could be listed on public stock exchanges such as shares of common stock in different firms. REITs classification could be equity, hybrid or mortgage. The Net Asset Value (NAV) of REIT is the key statistics to check out in a REIT, Adjusted Funds from Operations (AFFO) as well as Cash Available from Distribution (CAD). The challenges of REIT accrue from a slowing economy and also the financial crises being faced globally; shares value being depressed by 40 – 70 % in certain cases.

REIT or Real Estate is a company which owns, as well as operates income-producing real estate in most cases. Real estate is financed by certain REITs. In order to be a REIT, not less than 80% of its taxable income must be distributed by a company to its shareholders annually in the form of dividends.

Qualification
To be eligible for the benefits of being a pass-through entity for U.S. corporate income tax, a Real Estate investments Trust must:

1. Be planned or formed as corporation, association or trust
2. Be under the management of board of directors or trustees
3. Possess transferable shares or transferable certificates of interest
4. Not be an insurance company or financial institution
5. Be taxable as a domestic corporation; being managed by board of directors or trustees.
6. Pay dividend of not less than 90 percent of the REIT’s taxable income
7. Be jointly owned by one hundred persons or above
8. Have 95% of its income generated from dividends, property income and interest
9. Not less than 75 percent of total investment assets must be in real estate
10. Get not less than 75 % of gross income from mortgage interest or rents
11. Nothing over 50 percent of the shares can be held by 5 or fewer individuals in the course of the last half of every taxable year
12. Nothing over 20 percent of its assets may comprise of stocks in taxable REIT subsidiaries.

Subsequent to its origination in the United States in the year 1960, the Real Estate Investment Funds concept was launched in Australia in the year 1971. The first Listed Property Trust (LPT) on the Australian Stock Exchanges is the General Property Trust. Until March 2008, REITs that are listed on an exchange were referred to as Listed Property Trusts (LPTS); differentiating them from private REIT which is known as Unlisted Property Trusts in Australia. For a long time now, they have been renamed Australian Real Estate Investment Trusts, following international practice. Presently, over 70 A-REITs (Australian Real Estate Investments) are listed on the ASX.  Presently, Australia is getting increasing recognition as having the largest REITs market in the world outside the U.S.  Over 12 % of global listed property trusts can be seen on the ASX.