REITs in India – Are They Worth Investing In?

by KarNivesh | 23 September, 2025

In recent years, Real Estate Investment Trusts (REITs) have gained traction in India as an attractive investment avenue for those who want exposure to commercial real estate without the burden of directly owning or managing properties. For Indian investors, REITs present a middle ground between traditional real estate ownership and conventional investment vehicles like mutual funds or fixed deposits. With India’s commercial real estate sector booming and REITs demonstrating strong performance since their debut, it is worth exploring whether they truly deserve a place in one’s investment portfolio.

Flow diagram showing the structure and interactions between key entities in a Real Estate Investment Trust (REIT).

At their core, REITs are companies that own, operate, or finance income-generating properties such as office complexes, malls, business parks, and warehouses. Much like mutual funds, they pool money from multiple investors to create a diversified property portfolio. This model allows even small investors to tap into large-scale commercial real estate projects, which were once reserved for high-net-worth individuals. In India, REITs are regulated by the Securities and Exchange Board of India (SEBI), which mandates that they distribute at least 90% of their net distributable income to investors. This structure ensures that investors receive regular dividends, usually on a quarterly basis, making REITs particularly appealing for income seekers.

Comparison of returns generated by major REITs in India

India’s journey with REITs started in 2019 with the launch of Embassy Office Parks REIT, co-sponsored by Blackstone and Embassy Group. Since then, the space has expanded with three other major players: Mindspace Business Parks REIT, Brookfield India REIT, and Nexus Select Trust. Collectively, these REITs manage assets worth over ₹1.66 lakh crores, accounting for nearly 20% of India’s premium commercial stock. Despite hurdles such as the COVID-19 pandemic, Indian REITs have shown resilience, with none trading below their issue price to date.

Performance-wise, the results have been promising. Embassy REIT delivered returns of 24%, Mindspace REIT 18%, Brookfield India REIT 6%, and Nexus Select Trust an impressive 39%. Since inception, REITs have distributed over ₹16,800 crores in dividends, outperforming the NIFTY Realty Index in terms of income distribution. Investors typically earn annual yields of 5–7%, depending on occupancy levels and asset quality. These figures highlight the ability of REITs to deliver steady income while offering opportunities for capital appreciation.

Minimum investment amounts for different REIT investment options in India (in ₹)

Another major advantage is accessibility. Direct property ownership in commercial real estate often requires investments upwards of ₹50 lakhs to several crores. In contrast, REIT units on exchanges like NSE can be purchased for as little as ₹10,000–₹15,000. This minimum investment requirement, earlier pegged at ₹50,000, has been reduced to encourage wider retail participation. Moreover, mutual funds and ETFs that invest in REITs allow entry with as little as ₹100–₹500 through SIPs. For wealthier individuals, Small and Medium REITs (SM REITs) and private placement REITs offer additional opportunities, requiring investments of ₹10 lakhs and ₹25 lakhs respectively.

Taxation also plays a critical role in assessing REITs as an investment option. India follows a pass-through model to avoid double taxation. Dividend income from REITs is tax-exempt if the underlying Special Purpose Vehicle (SPV) has already paid corporate tax. Otherwise, dividends are taxed according to the investor’s slab rate. Interest income is fully taxable, with a 10% TDS applied once annual payouts exceed ₹5,000 (soon to be ₹10,000 from FY 2025-26). Capital gains taxation is straightforward: short-term gains (less than one year) are taxed at 20%, while long-term gains (more than one year) are taxed at 12.5% if annual gains exceed ₹1.25 lakhs. However, investors must note that indexation benefits are unavailable.

When compared to other instruments, REITs stand out in many ways. Fixed deposits may guarantee 6–8% annually, but REITs can deliver 5–7% in dividends plus the potential for appreciation. Unlike mutual funds, REITs guarantee income distribution due to SEBI regulations. And compared to direct property investment, REITs demand far less capital, eliminate management hassles, and provide liquidity since units are exchange-traded.

The advantages are clear: steady income, professional management, diversification across multiple properties, liquidity, transparency through SEBI guidelines, and even an inflation hedge as rentals often rise with inflation. However, risks remain. REIT valuations are sensitive to interest rate fluctuations; rising rates can reduce attractiveness relative to fixed-income options. Their performance is tied to broader market movements, limiting downside protection during volatile periods. Moreover, the current REIT market is heavily concentrated in office spaces, limiting sector diversification. Tax treatment can also be complex, requiring careful planning. Finally, since REITs reinvest only about 10% of profits, long-term capital appreciation is relatively modest compared to growth-focused equities.

On the regulatory front, recent developments have made REITs even more attractive. In September 2025, SEBI reclassified REITs as equity instruments rather than hybrid investments, aligning with global norms and paving the way for index inclusion. Lower minimum investments and the introduction of SM REITs have widened accessibility. Additionally, SEBI has strengthened investor protection by extending its SCORES grievance platform to REIT investors and regulating fractional ownership platforms.

The growth potential is significant. India currently accounts for less than 1% of the global REIT market capitalization. Comparatively, REIT penetration is over 90% in countries like the US, UK, and Australia. With 60% of India’s Grade-A office stock—worth around ₹4.5 lakh crores—being REIT-worthy, there is immense scope for expansion. Cities like Bengaluru, Hyderabad, NCR, Mumbai, Pune, and Chennai account for most of this premium stock. Interestingly, 67% of these assets are green-certified, commanding rental premiums of 12–14%, which further enhances portfolio value.

So, who should consider REITs? They are ideal for income-seeking investors, portfolio diversifiers, conservative growth seekers, and those looking for tax efficiency. However, investors who want guaranteed returns or aggressive capital appreciation may find them unsuitable. As with any investment, the best approach is to start small, diversify across multiple REITs, focus on fundamentals like occupancy and rental yields, and track interest rate movements.

In conclusion, REITs in India have established themselves as a credible and rewarding investment avenue. They provide a balance of stability, income, and growth potential while offering diversification beyond traditional equity and debt. For investors seeking real estate exposure without the high capital requirements and management headaches of direct ownership, REITs present a practical and lucrative option. As India’s economy continues to grow and urbanize, the demand for commercial real estate will rise, positioning REITs as a key wealth-building tool in the years ahead.