In a significant move to monetise assets, Finance Minister Nirmala Sitharaman announced plans to recycle the assets of central public sector enterprises (CPSEs) through dedicated real estate investment trusts (REITs) in Union Budget 2026. The move marks a pivotal shift in the government’s asset monetisation strategy, effectively turning sprawling public sector land parcels into tradable financial instruments. For the Indian investors, this opens a fresh gateway to the real estate play, minus the traditional headaches of high entry costs or physical land management. With PSU REITs, the Budget 2026 has essentially handed retail investors a seat at the table of India’s biggest institutional landholders, promising a steady stream of passive income backed by the country’s industrial backbone.
PSU REITs: What FM Sitharaman announces in Union Budget 2026
During her Budget speech, the Finance Minister proposed the creation of REIT structures specifically for CPSEs, which will turn public sector real estate assets into organised investments. This initiative is part of the government’s broader strategy for managing assets.
The main idea is centered around capital recycling. India has a large amount of public land, including railway properties and office buildings owned by various PSUs. Much of this land has historically been underutilised and not productive. Instead of letting it remain unused, the REIT model promotes efficient commercial management and provides a steady income stream.
The rental income generated can be used for new infrastructure and development projects. This approach is especially important now, as the government is committed to high capital expenditure, ₹12.2 lakh crore, as mentioned in Budget 2026, while also being cautious about increasing the fiscal deficit, which is at 4.4% of GDP for the FY 2025-26.
Therefore, PSU REITs allow the government to unlock value from underused public sector land, channeling funds into capital markets instead of depending only on Budget allocations or debt. This also creates a structured investment opportunity for both institutional and retail investors.
Dhawal Piplani, Partner, Nangia & Co LLP says, “Setting up of REITs for Central Public Sector Enterprise will unlock their economic value and give boost to infrastructure creation across the country.”
What PSU REITs mean for Indian investors
Until now, the Indian REIT market has mostly been led by private companies offering access to commercial spaces rented out to corporate clients. The market currently have five REITs: Embassy Office Parks REIT, Mindspace Business Parks REIT, Brookfield India REIT, Nexus Select Trust REIT, and Knowledge Realty Trust REIT.
These SEBI-listed REITs manage assets worth over ₹2.3 lakh crore and provide significant income to their investors. However, they often carry risks related to changing market conditions, tenant changes, or corporate failures.
PSU REITs have the potential to change this scenario by including government-backed assets. Essentially, they offer a low-risk option within the REIT framework, making them especially attractive to conservative investors looking for stable income with minimal risk.
The market potential is also considerable. By directing public sector real estate into REITs, the government is significantly expanding the investable real estate market in India. This move can encourage more institutional investors to participate, improve market activity, and strengthen the overall REIT ecosystem, which benefits retail investors.
Mayank Arora, Director, Nangia Global, adds, “Although the government has not been able to achieve its disinvestment target, the budget has proposed an asset monetisation plan by listing real estate assets owned by CPSEs across India. These assets are mostly rent generating and therefore qualify to be registered as REITs and made available for retail investors. This asset monetisation plan provides small investors an opportunity to participate in value being created by these strategically located real estate assets which were hitherto locked in with the Central government, by investing in Units of REITs.”
Animesh Hardia, Senior Vice President, Quantitative Research at 1 Finance, added further, “The Budget proposes dedicated REITs to monetise government’s real estate assets. For Indian households, CPSE REITs could become a new way to own India’s assets like tolls and airports. Done well, this can create a deeper passive-income market and diversify portfolios away from just residential property.”
The proposal for dedicated PSU REITs in the Union Budget of 2026 is not just a minor policy change; it is a strategic step aimed at enhancing the real estate investment landscape in India. By providing regulatory support, the government is working to create an environment where public real estate becomes a driver of growth rather than just a passive investment.
