REITs in India: How Real Estate Investment Trusts Are Democratizing Property Ownership

 

Introduction: Real Estate for Everyone

For decades, investing in real estate in India meant locking in huge sums of money, managing tenants, and grappling with long-term illiquidity. It was largely a playground for corporates, wealthy families, and institutional investors. But today, that’s changing—thanks to Real Estate Investment Trusts (REITs).

REITs, initially introduced in the U.S. in 1960, have revolutionized property investment worldwide. India embraced this innovation only recently, yet it’s already reshaping how people invest in commercial and retail real estate. With REITs, the promise of owning a slice of India’s growing real estate market is now accessible to anyone with a trading account—without the hassles of property management or massive capital outlay.

Since the launch of Embassy Office Parks REIT in 2019, India’s REIT market has grown to a market capitalization of over ₹80,000 crore. Investors, tax professionals, and policymakers are now closely watching this young yet promising asset class, which blends the stability of property with the liquidity of capital markets.

In this guide, we explore everything you need to know about REITs in India—from their evolution, structure, and economic significance to taxation, investment strategies, and future opportunities.

 

The Origins of REITs: From the U.S. to India

The REIT concept began in the United States under President Dwight D. Eisenhower, who signed the Real Estate Investment Trust Act of 1960. The idea was simple yet groundbreaking: allow ordinary investors to pool money to own shares in large-scale, income-producing properties.

This model spread globally:

• Australia: A-REITs in the 1970s
• Japan: J-REITs in the early 2000s
• Singapore: S-REITs became a regional hub

India took a more measured approach. SEBI introduced its first REIT framework in 2014, refined it in 2016 and 2019, leading to the listing of Embassy Office Parks REIT in April 2019—the first step toward democratizing commercial real estate investment in the country.

 

What Makes a REIT Different?

A REIT is essentially a trust or company that owns, operates, or finances income-generating real estate—like office buildings, malls, logistics parks, or data centers.

Unlike buying property directly, investors purchase units of the REIT, which trade on stock exchanges. This gives retail investors the opportunity to:

• Participate in large-scale real estate investments
• Enjoy liquidity through trading
• Earn regular dividends from rental income
• Avoid operational responsibilities of direct ownership

REITs Must Follow Strict Rules in India:

1. Distribute at least 90% of net distributable cash flows (NDCF) to unitholders.
2. Invest a minimum of 80% of assets in completed, income-generating properties.
3. Maintain transparency via quarterly disclosures and independent valuations.

These rules ensure REITs remain investor-friendly, liquid, and credible.

 

Why REITs Are a Game-Changer

Real estate has historically been an illiquid and capital-intensive investment in India. Exiting a property could take months, even years. REITs flip this model:

• Invest small, earn big: Buy REIT units like stocks with just a few thousand rupees.
• Stay liquid: Trade anytime on NSE or BSE.
• Diversify instantly: Gain exposure to dozens of properties with one investment.
• Earn steady income: Receive dividends from rental revenues.

For India’s growing middle class, this is transformative. Retail investors now gain access to institutional-grade real estate that was once exclusive to corporate giants and private equity firms.

 

The Indian REIT Landscape: Key Players

Here’s a snapshot of major REITs in India and what they bring to the table:

1. Embassy Office Parks REIT

• Launched: 2019
• Assets: 45+ million sq. ft. across Bengaluru, Pune, Mumbai, NCR
• Highlights: High occupancy rates (85%+), consistent dividend distributions

2. Mindspace Business Parks REIT

• Launched: 2020
• Assets: 32 million sq. ft. in Hyderabad, Pune, Mumbai, Chennai
• Highlights: ESG compliance, green buildings, stable cash flows

3. Brookfield India Real Estate Trust

• Launched: 2021
• Assets: Mumbai, Gurugram, Noida, Kolkata
• Highlights: Institutionally managed, robust leasing momentum

4. Nexus Select Trust

• Launched: 2023
• Focus: Retail, with 17 malls across 14 cities
• Highlights: Post-pandemic retail resilience, strong consumption-driven growth

Collectively, these REITs provide a gateway for small investors to participate in billion-dollar real estate portfolios through a few clicks.

 

Economic Significance: How REITs Reshape Capital Markets

REITs strengthen the Indian economy in multiple ways:

• Unlock capital for developers: Selling completed assets frees funds for new projects.
• Encourage transparency: Mandatory audits and valuations boost investor confidence.
• Boost financial inclusion: Retail investors now access commercial real estate.
• Attract foreign capital: Global pension funds and sovereign investors are drawn to yield-generating REITs.

According to SEBI, REITs have raised over ₹25,000 crore collectively through IPOs and follow-on offerings. This liquidity injection helps stabilize and modernize India’s real estate sector.

 

Tax and Regulatory Framework

India’s REITs are structured to balance investor incentives with government revenue:

• Pass-through taxation: Certain income (like rent) is taxed directly in unitholders’ hands.
• Distribution components: Interest, dividends, or return of capital are taxed differently.
• Withholding tax for NRIs: Non-resident investors face specific withholding rates.
• Compliance: SEBI mandates quarterly disclosures, independent valuations, and annual audits.

For tax professionals, correctly classifying distributions is critical to maximizing after-tax returns for clients.

 

Benefits for Investors

REITs combine the stability of real estate with liquidity akin to equity markets:

• Income seekers: Enjoy regular dividends, often yielding 6–8% annually.
• Long-term investors: Benefit from property appreciation and rental escalations.
• Portfolio diversifiers: Hedge against stock market volatility.

In short, REITs allow fractional ownership of premium properties with professional management—perfect for retail and institutional investors alike.

 

Challenges Facing Indian REITs

Despite strong potential, REITs face some challenges:

1. Interest Rate Sensitivity

REIT yields often move inversely with interest rates. Rising government bond yields may pressure payouts.

2. Sectoral Risks

Hybrid work models post-pandemic affected office-space REITs. Yet demand for Grade A offices in Bengaluru and Hyderabad remains robust.

3. Retail Awareness

Many investors confuse REITs with mutual funds or direct property ownership. Financial literacy campaigns are essential.

4. Tax Complexity

Different taxation of interest, dividends, and capital returns can confuse NRIs and domestic investors alike.

 

The Accountant’s Perspective

For CAs, auditors, and financial advisors, REITs introduce new compliance and advisory requirements:

• Verify asset composition (80% in completed properties)
• Ensure 90% NDCF payout compliance
• Conduct accurate property valuations
• Monitor tax audits for proper withholding and reporting
• Advise clients on REIT allocation and cross-border taxation

Staying updated on SEBI circulars and FEMA regulations is crucial for professionals advising HNIs and corporates.

 

Global Comparisons

While India’s REIT market is still nascent, the trajectory is promising:

• U.S.: Market cap exceeds $1.5 trillion
• Singapore: REITs comprise 12% of stock market capitalization
• India: Achieved credibility in under five years, with regulatory maturity and institutional participation

Future growth may include sector-specific REITs like logistics, healthcare, and data centers, as well as REIT mutual funds.

 

The Road Ahead: Opportunities in the Next Decade

• Data Centers & Warehousing: Driven by e-commerce and cloud infrastructure.
• Green REITs: Energy-efficient, sustainable buildings.
• Residential REITs: Rental housing segment expected to mature.
• Hybrid Models: Public-private partnerships to offer flexibility to developers.

Urbanization, digital infrastructure growth, and government initiatives like “Housing for All” will likely fuel REIT expansion—if regulations remain agile.

 

Expert Insights

Chartered Accountant R.K. Mehta says:

“REITs have done for Indian real estate what mutual funds did for equities—made them accessible, accountable, and attractive to the common investor. Investor education and policy consistency will be key to growth.”

Analysts predict the next REIT wave will depend on broadening asset classes, simplifying taxation, and integrating global investors through strong ESG and governance frameworks.

 

Actionable Takeaways

For Investors:

• Diversify with listed REITs.
• Check yields, sector exposure, and leverage before investing.
• Understand the tax implications of distributions.

For Accountants & Tax Professionals:

• Stay current with SEBI guidelines and tax rulings.
• Advise clients on NRI compliance and cross-border reporting.

For Developers:

• Consider REIT partnerships to unlock liquidity.
• Prepare for rigorous governance and transparency requirements.

For Policymakers:

• Simplify REIT taxation and encourage new asset classes.
• Strengthen investor protection to increase retail participation.

 

FAQs

1. What is a REIT?
A Real Estate Investment Trust owns or operates income-generating properties and distributes most of its income to unitholders.

2. How can I invest in REITs in India?
Through NSE or BSE using a demat account, just like buying shares.

3. Are REIT returns guaranteed?
No. Returns depend on rental income, occupancy rates, and market conditions.

4. How are REIT distributions taxed?
Interest is taxable as income; dividends may be exempt in some cases; capital returns are taxed at sale.

5. What’s next for REITs in India?
Expect diversification into logistics, data centers, residential rentals, and green REITs.

 

Conclusion: Real Estate for Everyone

REITs mark a quiet revolution in India’s financial landscape. They have transformed property investment from a high-capital, illiquid endeavor into a regulated, market-traded, and accessible asset class.

• Investors gain liquidity and steady income.
• Developers unlock capital for new projects.
• Regulators formalize the market and enhance tax transparency.

As India’s REIT ecosystem matures, it reflects the broader economic story of urban growth, digital transformation, and financial empowerment. With informed investing, REITs can truly make real estate ownership inclusive for all.

 

Author Bio:
Manoj Kumar, Founder of Manika TaxWise, is a chartered accountant and financial advisor with over 11 years of experience in taxation, investment, and compliance. His expertise spans real estate investment, capital markets, and NRI taxation.

References:

• Securities and Exchange Board of India (SEBI) Reports
• Embassy Office Parks REIT Annual Reports
• Mindspace Business Parks REIT Disclosures
• Brookfield India Real Estate Trust Financial Statements
• Nexus Select Trust IPO Documents