REITs - Real Estate Investment Trust - Advantages, How to invest?
India's economic growth relies heavily on its robust infrastructure and thriving real estate sector. But owning property directly is expensive, slow, and complicated. Over the last few years, listed real estate products have made it easier for investors to get exposure without buying buildings.
The development of robust infrastructure, including roads, bridges, airports, and public transportation systems, plays a pivotal role in attracting potential homebuyers, businesses, and investors. Furthermore, the real estate sector acts as a catalyst for economic expansion, generating employment opportunities and driving overall growth. However, the expansion of these sectors demands significant long-term capital, exceeding the availability of public funds.
To bridge the financing gap and fuel growth, Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) have emerged as crucial investment vehicles in India.
What are REITs?
REITs are investment trusts that own income-generating real estate assets such as commercial buildings, residential complexes, and shopping centres.
What are InvITs?
InvITs, on the other hand, invest in revenue-generating infrastructure assets, including highways, power transmission lines, and renewable energy projects.
Both REITs and InvITs were introduced in India in 2014 and are regulated by the Securities and Exchange Board of India (SEBI). Initially, the minimum application value for REITs and InvITs was Rs. 50,000 and Rs. 1 Lakh, respectively, and the minimum trading lot was 100 units. However, in 2021, SEBI reduced the minimum application value to a range of Rs. 10,000-15,000 and the minimum trading lot to one unit, making them more accessible to a wider range of investors.
What are the advantages of REITs and InvITs?
- Diversification: REITs and InvITs provide investors with a diversified portfolio of real estate or infrastructure assets, reducing risk compared to investing in individual properties or projects.
- Stable Income: Both REITs and InvITs are mandated to distribute a minimum of 90% of their net distributable cash flows to investors as dividends every quarter. This translates to regular cash flow that investors can rely on, particularly beneficial for individuals seeking retirement income or consistent returns.
- Liquidity: Being listed on stock exchanges, REITs, and InvITs offer liquidity, allowing investors to buy or sell units easily. This liquidity contrasts with the relatively illiquid nature of direct real estate or infrastructure investments.
- Professional Management: REITs and InvITs are managed by investment managers and asset managers, bringing expertise in property or infrastructure management. This professional management can enhance the performance and value of the underlying assets.
- Access to Large-Scale Assets: Investing in REITs and InvITs allows investors to gain exposure to large-scale real estate or infrastructure projects that may be otherwise inaccessible to individual investors.
- Potential for Capital Appreciation: Alongside the income generated through dividends, investors may benefit from the potential appreciation in the value of the underlying assets, leading to capital gains.
- Transparency and Regulatory Oversight: SEBI regulates REITs and InvITs, ensuring transparency and adherence to regulatory standards. This oversight contributes to a level of investor protection.
How to invest in REITs?
Effective January 1, 2026, SEBI has reclassified Real Estate Investment Trusts (REITs) as equity-related instruments for mutual funds and specialised investment funds. This shift allows for enhanced participation, removing previous restrictions and treating REITs under equity allocation limits rather than hybrid/debt categories. Currently, you can invest in REITs that directly trade on the stock exchange.
There is also a Nifty REITs & InvITs index that aims to track the performance of REITs and InvITs that are publicly listed and traded on the National Stock Exchange (NSE). But currently, you take exposure to this index since there are no ETFs tracking it.
How Do REITs Work?
The income for the REITs comes in the form of rental income from real estate investments as well as the capital gains on the sale of such properties. The distributable cash flow is derived after adjusting for various costs associated with the management of this real estate portfolio, as well as the fees for various professionals, including the management company and the trustees.
Who Should Invest in REIT ETFs?
So, should investors invest in REIT ETFS? The answer depends on goals and expectations.
REIT ETFs may be considered by:
- Investors looking for some income-oriented exposure
- Those seeking diversification beyond equity, debt and commodities
- Investors who prefer liquidity over owning physical properties
- Long-term investors comfortable with volatility
They may not be appropriate for:
- Investors seeking rapid capital appreciation
- Those uncomfortable with market-linked price movements
- Investors relying solely on guaranteed income
How are REITs taxed?
For investors, interest income is taxed at slab rates, dividend income is tax-exempt if the Special Purpose Vehicle (SPV) opts for a lower tax regime, and rental income is taxed at slab rates. Capital gains on listed units are taxed at 15% (short-term, <12 months) or 12.5% (long-term, >12 months).
Tax treatment can change over time. Investors should always check the latest regulations before investing.
To Sum it Up
REITs offer a practical way to participate in India’s commercial real estate market without owning property directly. They combine income potential, diversification, and liquidity in a single listed product. However, they are not substitutes for fixed deposits or equity funds, and they carry their own set of risks. When used thoughtfully, REITs may play a useful supporting role in a long-term investment portfolio.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Please note that this article or document has been prepared on the basis of internal data/ publicly available information and other sources believed to be reliable. The information contained in this article or document is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party in any manner. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article or document.
Published on Feb 13th, 2026