The Indians aspire to have property to get rental income. However, real estate is costly, very strenuous and demands a heavy investment.
Enter REITs (Real Estate Investment Trusts) the ideal middle point between stock market and property investment.
Fun Fact: The first REIT in India was launched in 2019, but globally, REITs have been around since the 1960s.
In this blog, we’ll break down what REITs are, how they work, their benefits and risks, and how you can start investing — even with just a few hundred rupees.
What Are REITs?
A Real Estate Investment Trust is a company that owns, and manages, or finances real estate that generates income through sources such as offices, warehouses, malls, etc.
The REITs raises money of many investors (similar to mutual funds) and invests in commercial property which brings in rental revenue.Investors receive dividends from this rental income and also benefit from any capital appreciation in the REIT’s value.
How Do REITs Work?
- REIT raises money via IPO or listing.
- Buys commercial properties (e.g., business parks, malls).
- Rents them out to tenants (like MNCs, banks, retail chains).
- Collects rental income, which is distributed to investors.
- You get dividends and possible appreciation in REIT unit price.
Some Popular REITs in India
Here are three SEBI-registered REITs currently listed in India:
| REIT Name | Major Assets | Listed Since | Sector Focus |
|---|---|---|---|
| Embassy Office Parks REIT | Office parks in Bengaluru, Mumbai, NCR | 2019 | Commercial |
| Mindspace Business Parks REIT | IT parks in Pune, Hyderabad, Mumbai | 2020 | Commercial |
| Brookfield India REIT | Office assets in Noida, Mumbai, Gurugram | 2021 | Commercial |
How Much Can You Invest?
- Minimum investment in Indian REITs is as low as ₹10,000 – ₹15,000 (depending on the REIT and number of units).
- You can buy REITs through your stock broker on NSE or BSE, just like shares.
- REITs must distribute 90% of their net distributable cash to unit holders.
Benefits of Investing in REITs
| Benefit | Why It Matters |
|---|---|
| Low entry cost | No need for ₹50 L–₹1 Cr property purchases. |
| Steady passive income | Quarterly dividends from rental income. |
| Liquidity | Listed on stock exchanges — buy/sell like shares. |
| Diversification | Access to premium commercial assets. |
| Regulated by SEBI | Ensures transparency and investor protection. |
Risks to Watch Out For
| Risk | Description |
|---|---|
| Market volatility | REIT prices fluctuate with market conditions. |
| Tenant risk | If major tenants vacate, income can drop. |
| Interest rate sensitivity | High interest rates can impact REIT returns. |
| Dividend taxation | Dividends may be taxed based on your income slab. |
Taxation of REITs in India
Here’s a simplified breakdown:
| Income Type | Tax Treatment |
|---|---|
| Dividend Income | Taxed as per your income slab |
| Capital Gains | STCG (≤ 3 yrs) @ 15% • LTCG (> 3 yrs) @ 10% (above ₹1 L) |
| Interest Income | Taxed as per slab |
Pro Tip: Always check the REIT’s distribution breakup to know how much is dividend vs. interest.
Real-World Example
Let’s say you invest ₹1,00,000 in a REIT that gives 6.5% annual yield:
- You earn ₹6,500 per year (≈ ₹1,625 quarterly).
- You can reinvest the dividends or use it as passive income.
- If the REIT’s unit price increases by 5%, your total return could be 11.5%.
Who Should Invest in REITs?
- Salaried professionals wanting real estate exposure without huge capital.
- Retirees seeking stable passive income.
- Young investors building a diversified portfolio.
- NRIs looking to invest in Indian commercial property.
How to Start Investing in REITs?
- Open a Demat & Trading account (if not already).
- Research listed REITs (check dividend yield, occupancy, tenants).
- Buy REIT units via your broker (NSE/BSE).
- Track performance and quarterly distributions.
- Hold long term for both income + growth.
Expert Tip
“REITs are a great way for small investors to participate in India’s booming commercial real estate story. But like all investments, do your homework on occupancy, tenant quality, and dividend track record.”
— CA Mehul Shah, SEBI-Registered Investment Advisor
Key Metrics to Evaluate a REIT
| Metric | Why It’s Important |
|---|---|
| Occupancy Rate | Higher = better rental income stability |
| Dividend Yield | Indicates income return potential |
| Net Asset Value (NAV) | Helps you gauge fair value |
| Debt-to-Equity | Lower is safer; shows financial health |
| Tenant Profile | MNCs & long-term leases are a plus |
REITs vs. Physical Real Estate
| Feature | REITs | Physical Property |
|---|---|---|
| Entry Cost | ₹10K – ₹15K | ₹30 L + |
| Liquidity | High (listed) | Low |
| Maintenance | Zero | High |
| Diversification | High (many properties) | Low (usually one property) |
| Passive Income | Quarterly | Monthly/Variable |
Future of REITs in India
India’s REIT market is expected to grow rapidly due to:
- Urbanization & demand for Grade-A office spaces.
- Increasing institutional participation.
- Growing investor awareness.
- SEBI’s push for retail investor participation.
According to a Knight Frank report, India’s REIT-worthy commercial real estate could cross 100 million sq ft by 2030.
You don’t need to buy a property to earn rental income anymore.
REITs in India are democratizing real estate investing by offering:
Read Related Topic : What You Can Learn from Blackstone, REITs & Institutional Investors
- Low entry cost
- Passive income
- Diversification
- Liquidity
Whether you’re a beginner or an experienced investor, REITs can be a smart addition to your portfolio — especially in today’s uncertain markets.
Looking to build a passive income portfolio with expert guidance?
Contact us for the best real estate consultation service and start investing in REITs the smart way.
Conclusion
No Property? No Problem! REITs in India have transformed the way the people can invest in the real-estate market without having to possess the physical property. Owning Real Estate Investment Trusts will allow you to receive regular dividends, capital growth over the long term, and portfolio diversification, without having to deal with property management.
As the commercial real estate markets of India continue to expand and investor confidence rises, the REITs provide an accessible, regulated and transparent means to create passive forms of income. REITs are the key to financial development, without the bricks and mortar, to smart investors who want to enjoy consistent returns and exposure to the real estate.
FAQ,s Frequently asked questions
1. What are REITs in India?
REITs (Real Estate Investment Trusts) are investment vehicles that allow individuals to invest in income-generating real estate assets without directly owning property.
2. How do REITs generate income for investors?
REITs earn rental income from commercial properties like offices, malls, and warehouses, which is then distributed as dividends to investors.
3. What are the minimum investment requirements for REITs in India?
As per SEBI guidelines, investors can start with as low as one REIT unit, making it affordable for retail participants.
4. Which are the major REITs currently listed in India?
Some popular REITs in India include Embassy Office Parks REIT, Mindspace Business Parks REIT, and Brookfield India REIT.
5. What should investors consider before investing in REITs?
Investors should evaluate the REIT’s portfolio quality, occupancy rates, yield history, management credibility, and market outlook.
6. Can REITs help in long-term wealth creation?
Yes, through consistent income and potential capital appreciation of property assets, REITs can contribute to long-term financial growth.
