What is a REIT?
Buying a large shopping mall or office block takes hundreds of crores of taka, which no ordinary person can manage. A REIT pools many people’s money to buy or build such property, rents it out, and pays most of what is left of the rent after costs to its unit holders. You don’t own the whole building, but a small share of its income.
The idea first became law in the US in 1960, so that small investors too could take part in large income-producing property. Around 40 countries and regions now have REIT laws. In the US, to qualify as a REIT a company must pay out at least 90% of its taxable income as dividends each year.
Picture a big market in your area with hundreds of shops paying rent every month. You can’t buy the whole market, maybe not even one shop. But if thousands of people buy it together, hire a professional manager to run it, and share the rental income every year, then with a small sum you get a share of the market’s rent. That is how a REIT works.
Why it matters to an investor
- Real estate for a small sum: a REIT does not need the large amount a flat or land does, and can give you a share in many properties at once.
- Potential for regular income: because REITs must pay out most of their income, they usually pay regular dividends, though less when income falls.
- Less hassle: finding tenants, repairs and paperwork are handled by the manager, who charges a fee in return.
- Two kinds of risk: property risk (empty space, falling rents) and market risk (the unit price rising and falling).
Kinds of REIT and their risks
Most REITs own property themselves and earn from rent; these are called equity REITs. Some lend to real estate or invest in mortgage loans instead of buying property; these are mortgage REITs, and they usually run on more borrowed money. Some REITs are listed on a stock exchange and some are not.
- Vacancies and rents: when tenants leave or rents fall, both income and dividends fall.
- Interest rates: REITs usually borrow to buy property too. When rates rise, borrowing costs more, and investors who buy REITs for income also look at alternatives such as bonds.
- Selling: units of a listed REIT can be sold on the exchange, though at the market price of the moment. Unlisted REITs are hard to sell; a US SEC bulletin noted upfront fees and commissions of about 9–10% of the investment on such REITs.
- Dependence on the manager: which property to buy, at what price and with how much borrowing are the manager’s decisions.
REITs in Bangladesh
BSEC approved REIT rules on 31 March 2024, and the final rules were published in August 2024. Under them a REIT is set up as a trust and must pay at least 90% of its distributable net income each year as cash dividends. REITs for development projects are closed-end with a 10-year life; rental REITs are open-end with a 15-year life.
Although the rules exist, as of October 2026 we found no report of a REIT having launched and started trading in Bangladesh. The rules can change; if a REIT does come along, check the latest information from BSEC and the stock exchanges.
Worked example
- Say a REIT’s market and office building earn Tk 20 crore a year in distributable income after costs. The REIT has 10 crore units.
- Paying out 90% means Tk 18 crore: Tk 1.80 a unit. If a unit trades at Tk 15, that is 12% of the price.
- The next year some shops stand empty and income falls to Tk 15 crore. Paying out 90% gives Tk 13.5 crore: Tk 1.35 a unit. News like this can push the unit price down too.
Result: a REIT’s dividend comes from rent, so how much of the property is let, and at what rent, is what counts. “Must pay out 90%” means a share of income, not a promise of any fixed amount. The numbers are only an example.
Common mistakes
- Hearing “must pay out 90%” and expecting a fixed income. When income falls, so do dividends.
- Thinking of a REIT like your own flat or land. Its unit price can move every day like a share.
- Looking only at the dividend rate, not at which properties, how much debt and how much empty space.
- Putting money into an unlisted REIT and assuming it can be taken out whenever needed.
A REIT is a small share in the rental income of large property: the income comes from rent, so rents, debt and market prices are all part of its risk.