Introduction
With soaring commercial real estate values and a growing appetite for income‑generating assets, Indian REITs (Real Estate Investment Trust India) have emerged as a compelling option for retail and institutional investors alike. Launched in 2019, India’s REIT market now offers a liquid, transparent way to own a slice of Grade‑A office parks, malls, and warehouses without the hassles of direct property management. In this guide, we explain what REITs are, how they work in India, the current market landscape, key players, advantages, risks, and practical steps to build a well‑diversified REIT portfolio.
What Is a Real Estate Investment Trust India?
A Real Estate Investment Trust India is a SEBI‑registered entity that owns, operates, or finances income‑generating real estate. Its structure must comply with these basics:
- Minimum Asset Size: At least ₹500 crore of properties.
- Leverage Cap: Total borrowings capped at 49% of the REIT’s assets.
- Distribution Requirement: 90% of net distributable cash flows paid out to unitholders at least bi‑annually.
- Liquidity: Units trade on stock exchanges like shares, offering easy entry and exit.
These rules democratise access to commercial real estate, allowing you to invest with as little as ₹10,000 versus the crores needed for direct purchases.
Why Invest in Indian REITs?
- Attractive Yields & Steady Income
- Indian REITs currently yield around 7–9% annually, significantly above average fixed‑income products.
- Cash distributions come from long‑term corporate leases, providing predictable income streams.
- Indian REITs currently yield around 7–9% annually, significantly above average fixed‑income products.
- Capital Appreciation Potential
- Office rents in Mumbai Metropolitan Region (MMR) have risen 28% from 2022 to 2025, underpinning asset value growth .
- Grade‑A assets in prime locations like BKC or Whitefield often enjoy strong demand and price resilience.
- Office rents in Mumbai Metropolitan Region (MMR) have risen 28% from 2022 to 2025, underpinning asset value growth .
- Tax Efficiency
- Distributions from REITs are tax‑efficient: rental income is taxed at the REIT level, with only 10% tax on distribution to unitholders under certain conditions.
- No dividend distribution tax applies, unlike traditional equity mutual funds.
- Distributions from REITs are tax‑efficient: rental income is taxed at the REIT level, with only 10% tax on distribution to unitholders under certain conditions.
- Inflation Hedge
- Leases often include annual escalation clauses (5–10%), helping income keep pace with inflation.
- Leases often include annual escalation clauses (5–10%), helping income keep pace with inflation.
- Diversification
- Gain exposure to commercial office parks, shopping centres, and warehousing without taking on large single‑asset risks.
- Gain exposure to commercial office parks, shopping centres, and warehousing without taking on large single‑asset risks.
Overview of India’s REIT Market (2025)
| REIT Name | Market Cap (₹ Cr.) | Assets Under Management (AUM) (₹ Cr.) | Yield (%) | Major Assets |
| Brookfield India REIT (BIRET) | 9,700 | 18,000 | 7.0 | Embassy Manyata Tech Park, Bengaluru |
| Mindspace Business Parks REIT (MIND) | 20,150 | 33,000 | 7.5 | Mindspace Airoli, Hyderabad |
| Nexus Select Trust (NXST) | 20,175 | 30,000 | 8.0 | Nexus Hub, Pune; Nexus Vijaya Mall, Chennai |
The three listed Indian REITs account for over ₹70,000 crore in AUM, spanning office, retail, and industrial segments.- SEBI’s proposed reforms (June 2025) aim to lower entry sizes and align disclosures, further inviting retail participation.
- Mutual funds can soon allocate up to 20% in REITs, doubling the previous 10% cap, which may boost flows into these trusts.
How to Evaluate Indian REITs
- Portfolio Quality
- Look for Grade‑A, well‑located assets with high occupancy (ideally above 85%).
- Check tenant mix: diversified, credit‑worthy lessees like global IT firms ensure stable cash flows.
- Look for Grade‑A, well‑located assets with high occupancy (ideally above 85%).
- Lease Profile & Escalations
- Longer average lease tenure (5–9 years) reduces rollover risk.
- Escalation clauses (typically 5% every three years) support income growth.
- Longer average lease tenure (5–9 years) reduces rollover risk.
- Leverage & Balance Sheet
- Lower leverage (below 40%) increases financial flexibility.
- Covenants and debt maturity profiles (staggered maturities) limit refinancing risk.
- Lower leverage (below 40%) increases financial flexibility.
- Distribution Coverage
- The coverage ratio (cash flow ÷ distribution) indicates sustainability. Above 1.1x is considered healthy.
- The coverage ratio (cash flow ÷ distribution) indicates sustainability. Above 1.1x is considered healthy.
- Management & Sponsor Track Record
- Sponsors like Brookfield, HDFC, or Blackstone bring experience and ability to source quality assets.
- Professional management teams add operational expertise.
- Sponsors like Brookfield, HDFC, or Blackstone bring experience and ability to source quality assets.
- Liquidity & Trading Volumes
- Higher daily volumes (₹50–100 Cr.) ensure you can buy or sell without large price impact.
- Higher daily volumes (₹50–100 Cr.) ensure you can buy or sell without large price impact.
Steps to Invest in REITs in India
- Open a Demat & Trading Account with any SEBI‑registered broker (Zerodha, ICICI Direct, HDFC Securities).
- Research & Select REITs based on metrics above and your income needs.
- Place a “Buy” Order through your trading platform like you would for any equity share.
- Monitor Distributions: REITs pay out income bi‑annually; watch the record dates and ex‑date.
- Review Portfolio Annually: Rebalance or top up based on yield changes and market conditions.
Real‑Life Investor Example
Ramesh, a 45‑year‑old IT professional in Pune, wanted stable income to supplement his monthly expenses. In 2021, he invested ₹10 lakh equally in Mindspace REIT (MIND) and Nexus Select Trust (NXST). By 2025, he has received cumulative distributions of ₹3.2 lakh (an 8% p.a. yield) and seen unit price gains of 15%. His portfolio now yields 7.5% annually, directly credited to his linked bank account—far better than his previous bank fixed deposits.
Risks to Consider
- Interest Rate Sensitivity: REIT valuations can fall if bond yields rise sharply, as higher rates make fixed-income alternatives more attractive.
- Rollover Risk: Expiring leases may not renew at the same rates, affecting income.
- Market Liquidity: Compared to blue‑chip stocks, REITs have lower volumes, potentially leading to wider bid‑ask spreads.
- Regulatory Changes: Changes in tax treatment or REIT norms could impact returns; stay updated with SEBI announcements.
- Concentration Risk: A REIT heavily concentrated in one geography or tenant sector can be vulnerable to local downturns.
Taxation of REITs in India
- At the REIT Level:
- Rental income taxed at 30% (plus surcharge and cess).
- Interest income taxed at applicable rates.
- Rental income taxed at 30% (plus surcharge and cess).
- At the Unitholder Level:
- Distributions from rental income are tax‑exempt in the hands of investors if distributed, provided the REIT has paid tax.
- Long‑term capital gains (holding > 36 months) taxed at 10% over ₹1 lakh; short‑term gains taxed as per slab rates.
- Distributions from rental income are tax‑exempt in the hands of investors if distributed, provided the REIT has paid tax.
This structure makes Indian REITs more tax‑efficient compared to dividend‑paying equity or direct property rental.
Future Outlook for Real Estate Investment Trust India
- Expansion Beyond Offices: Warehouse and logistics REITs are on the horizon, given the e‑commerce boom.
- Retail & Shopping Malls: As consumer spending rebounds, retail assets may be spun off into specialised trusts.
- Residential REITs: SEBI is exploring frameworks, potentially opening the residential rental market to REIT structures.
- Increased Retail Participation: Lower entry sizes and the rise of thematic mutual funds could boost small‑investor inflows.
- Global Capital Inflows: Falling interest rates and stable cash flows will continue to attract foreign institutional investors.
Conclusion
Navigating the REIT market in India requires understanding the structure, evaluating yield and growth prospects, and balancing risks such as interest rate movements and lease rollovers. With yields of 7–9%, tax‑efficient cash flows, and exposure to high‑quality commercial real estate, Indian REITs are a powerful addition to any diversified portfolio. By following this guide—assessing portfolio quality, tracking SEBI reforms, and monitoring lease profiles—you can confidently invest in the future of real estate investment trust India and build a lasting, income‑generating asset base.
Source : fulinspace.com