Posted in Finance, Accounting and Economics Terms, Total Reads: 765
India’s real estate sector is booming with a new building is built every minute. As an investor you want to gain by this boom but you don’t have any idea of real estate and also you are afraid of liquidity as real estates are illiquid assets. The solution for such investor is securitization.
In securitization such illiquid assets are pooled together to form an investment pool and then securities are issued according to the value of the pool.
For e.g. 10 buildings are to be built with a value of Rs 1 lakh each with a total value of 10 lakhs. For building these buildings the owner or the builder takes loan of 10 lakhs. Now these loans are pooled into an investment pool having a total value of 10 lakhs. Now according to this pool value of 10 lakhs shares are issued of 10 lakhs. This whole process is known as securitization.