Imagine owning a piece of premium commercial real estate in Mumbai, Bangalore, or Delhi—without shelling out crores, dealing with paperwork, or managing the stress of tenants. What if you could earn a steady rental income from it and watch your investment grow, all with the same ease as buying a stock?
Welcome to the world of Real Estate Investment Trusts (REITs)—a game-changer in India’s investment landscape. Once reserved for big-ticket investors, commercial real estate is now within reach of everyday investors. With REITs, you can own a slice of high-value properties, enjoy regular dividends, and build wealth—all without the hassle of direct ownership.
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What is a REIT?
A Real Estate Investment Trust (REIT) is an investment vehicle that owns and manages income-generating real estate assets. It provides an opportunity for retail investors to invest in commercial real estate with the benefit of steady rental income.
Key Components of a REIT Structure:
- Sponsor: Creates the REIT by transferring real estate assets from a Special Purpose Vehicle (SPV) to the REIT in exchange for its units.
- Public Issue: The remaining units are issued to investors via an initial public offering (IPO).
- Proceeds: The IPO funds go to the sponsor selling the REIT units.
- Revenue Generation: Tenants of the REIT-owned assets pay lease rentals to the SPV managing the properties.
- Income Distribution: After statutory dues and tax deductions, at least 90% of net distributable cash flows are distributed as dividends to unit holders.
Advantages of REITs
REITs allow retail and institutional investors to invest in commercial real estate, offering stable rental income, capital appreciation, and portfolio diversification.
| For Investors (Demand Side) | For Developers & Private Equity (Supply Side) |
|---|---|
| Earns regular rental income from leased properties | Monetises operational assets through public listing |
| Potential for long-term capital appreciation | Unlocks capital and helps in deleveraging balance sheets |
| Lower hassle compared to direct real estate investments. | Improved regulations enhance investor confidence |
| Low entry barriers, making real estate investment accessible | High credit quality and lower cost of capital due to REIT structure |
Who Can Invest in REITs?
Both retail and institutional investors can invest in REITs in India. The eligibility criteria include:
- Retail Investors:
- Individual investors, including resident and non-resident Indians (NRIs).
- Initially, the minimum investment in a REIT was ₹50,000. However, regulatory changes now allow retail investors to buy units in smaller amounts. Typically, you can purchase just a single unit as the minimum investment
- Investors can trade REIT units like stocks on the stock exchange.
- Institutional Investors:
- Mutual Funds, bBanks, iInsurance cCompanies, and pPension fFunds can invest in REITs.
- Foreign Portfolio Investors (FPIs) and Qualified Institutional Buyers (QIBs) are also allowed to participate.
- Large investors can subscribe to private placements of REITs.
How to Invest in REITs
1. Through stock exchanges (For retail investors)
- REITs are listed and traded on the NSE (National Stock Exchange) and BSE (Bombay Stock Exchange).
- Investors can buy and sell REIT units just like stocks using their demat account and trading platform.
- REIT units are available in small denominations, making them accessible to retail investors.
2. Through Initial Public Offerings (IPO)
- Investors can subscribe to a REIT IPO when a new REIT is launched.
- IPO applications can be made through stock brokers, banks, or online trading platforms.
3. Through Mutual Funds and Exchange-Traded Funds (ETFs)
- Some mutual funds and ETFs invest in REITs, allowing indirect exposure.
- These funds provide diversified REIT investments across multiple properties.
4. Institutional Investment (For Large Investors)
- Institutional investors can participate in bulk deals and private placements.
- Large investors can negotiate direct purchases of REIT units or invest through alternative investment funds (AIFs).
Taxation on REIT Investments
- Dividend Income: If the SPV opts for the concessional tax rate regime under Section 115BAA, dividend income is taxable for unitholders at applicable slab rates. If the SPV does not opt for the concessional tax rate regime under Section 115BAA, the dividend income is exempt for unitholders. A 10% TDS will be applicable for dividend paid to resident unitholders if the amount exceeds ₹5,000 p.a. (₹10,000 p.a. from FY 2025-26 onwards)
- Interest Income: Interest income earned by unitholders from REITs is taxable as per the applicable slab rates. A 10% TDS is deducted if interest income exceeds ₹5,000 p.a. (₹10,000 p.a. from FY 2025-26 onwards)
- Capital Gains: Short-Term Capital Gains (STCG): Gains from selling REIT units held for less than one year are taxed at 20%.
Long-Term Capital Gains (LTCG): Gains from selling REIT units held for more than one year are taxed at 12.5% if they exceed ₹1.25 lakh annually. Indexation benefits are not available.
- Rental Income: Rental income distributed by REITs is taxed at the applicable slab rates to the unitholder. A 10% TDS is deducted on rental income.
Read more : https://1finance.co.in/blog/income-from-real-estate-investment-trusts-reits-and-its-taxation/
Growth of REITs in India
India’s First REIT: Embassy Office Parks
India’s first REIT was launched in March 2019 by BRE Mauritius Investments (Blackstone Group) and Embassy Property Development Pvt. Ltd.
Key Highlights:
- Oversubscribed IPO, with 21% returns in the first six months.
- Market value: ₹30,000 crore (as of August 2019).
- Portfolio:
- 11 commercial properties
- 4 hotels
- 1 solar park
- 23 million sq. ft. operational leasable area
- 4 major micro-markets
Recent REIT Listings & IPOs
- Nexus Select Trust (2023) – India’s first retail REIT focused on shopping malls and retail spaces.
- Brookfield India REIT & Mindspace Business Parks REIT – Successfully launched and expanded portfolios.
- Knowledge Realty Trust (March 2025) – A joint venture between Blackstone Inc. and Sattva Group aiming to raise ₹62 billion ($712 million) in India’s largest REIT IPO.
Performance of Existing REITs
- According to the Indian REITs Association in Q3 FY2025, four publicly listed REITs distributed ₹1,505 crore to over 260,000 unitholders, marking a 17% year-over-year growth.
India vs. Global REIT Markets
Global REIT Market Overview:
- US: Established in 1960, REITs now have a market cap of $1.2 trillion, covering 96% of the real estate industry.
- Singapore & Japan: REITs account for nearly 50% of the real estate sector’s capitalisation.
- Hong Kong: REIT market remains underdeveloped, mainly due to lack of tax incentives and regulatory support.
India’s Slow But Steady REIT Growth:
- First REIT launched in 2019, five years after SEBI’s 2014 regulations.
- The Indian REIT market now manages over ₹1.52 trillion in assets, with a combined market capitalisation exceeding ₹95,000 crore (February 2025).
Challenges & Future Prospects for Indian REITs
Challenges:
- Fragmented real estate market: Lack of transparency and uniformity in property valuations.
- High compliance requirements: Smaller developers may prefer lease rental discounting loans over REITs.
- Restricted banking access: Banks and insurance firms have limited exposure to REITs.
- Reluctance from developers: Many developers prefer capital appreciation over dilution through REITs.
Future Potential:
- Continued regulatory reforms will encourage more REIT launches.
- Increased investor participation as awareness and confidence grow.
- Rising AUM and market capitalisation, making REITs a viable long-term investment vehicle in India.
- Tax incentives and policy support could accelerate the growth trajectory, similar to Singapore and Japan.
