A Real Estate Investment Trust (Reit) is a company that owns and operates income-generating real estate, which could be offices, warehouses, hotels, and apartment buildings.
The business model of a Reit is to lease or rent out properties and the income received is then distributed as dividend among shareholders.
A mortgage Reit provides finance to income-creating real estate and the interest earned by it is its income, redistributed as dividends.
According to Sebi’s regulations, Reits can distribute around 90 percent or more of their income as dividends to their shareholders. Shareholders are then taxed on these dividend earnings.