REITS: YOUR TICKET TO BIG-LEAGUE REAL ESTATE

Real estate has historically been the asset class that has created the highest wealth for investors around the world, but direct property investment often comes with high entry barriers, poor liquidity, and the hassle of ongoing management. Real Estate Investment Trusts (REITs) and Small and Medium REITs (SM REITs), the SEBI-regulated vehicles are becoming increasingly attractive alternatives to traditional investments. As per Alok Aggarwal, Managing Director & CEO of Brookfield India Real Estate Trust and Chairman of the Indian REITs Association, “India’s REIT market has moved beyond its early phase to become a reliable investment avenue for both institutional and retail investors. The five listed REITs command a combined market capitalisation of approx. Rs. 1.5 lakh crore, reflecting growing confidence in the asset class and its ability to deliver stable, predictable distributions. As the ecosystem evolves, diversification across sectors and cities will define the next phase of growth, positioning REITs as a mainstream asset class in India and a critical bridge between physical real estate and financial markets.”

What are REITs and SM REITs?
Real Estate Investment Trusts (REITs) are SEBI-regulated investment vehicles that own and operate portfolios of income-generating commercial real estate — such as office parks, shopping centres, and hospitality assets. These trusts collect rent and distribute a large portion of their income to investors in the form of dividends or interest.

Small and Medium REITs (SM REITs) are a new sub category of REITs, introduced by SEBI in 2024, designed to facilitate co-ownership of small to mid-scale commercial real estate assets (valued between ?50 crore and ?500 crore), aiming to make real estate investing more accessible to a wider set of investors. Both types of REITs are listed on stock exchanges and are subject to strict regulatory frameworks issued by SEBI. Rahul Jain, Head - Public Markets, Alt details on how these innovative products work, their benefits, and why they are gaining traction among modern Indian investors.

Regular Income
REITs and SM REITs are required to distribute at least 90-95% of their net distributable cash flows to unitholders, making them suitable for income-seeking investors, such as retirees or those looking to supplement salary income.

Low Minimum Investment
Listed REITs are highly accessible, with unit prices typically ranging from Rs100 to Rs400. SM REITs have a higher ticket size (?10 lakh minimum), but they provide a niche-targeted investment approach.

Liquidity
Unlike direct real estate investments, which are cumbersome to sell, REIT and SM REIT units can be bought and sold on stock exchanges, providing investors with liquidity and exit flexibility.

Regulatory Oversight and Transparency
REITs and SM REITs are governed by SEBI regulations that mandate regular financial disclosures, independent valuations, and separation of roles among sponsors, trustees, and managers. This high level of transparency enhances investor confidence.

Built-in Inflation Protection
Commercial leases in REIT portfolios often have annual rent escalation clauses — typically 5% per annum or 15% every three years. This ensures rental incomes rise over time, protecting investors from inflation and enhancing long-term yields.

REITs and SM REITs - Market Landscape in India
Currently, there are 5 listed REITs in India - Embassy Office Parks REIT, Mindspace Business Parks REIT, Brookfield India Real Estate Trust, Nexus Select Trust, and the newly listed Knowledge Realty Trust (KRT). The SM REIT market, while fairly nascent at this stage, is expected to grow over 10 times reaching $5 billion by 2030. Currently, there are PropShare Platina (launched December 2024) and PropShare Investment Trust (which had its second scheme IPO in July 2025) A 2025 report from JLL and Property Share noted that nearly 70% of SM REIT-worthy assets are concentrated in Mumbai, Delhi-NCR, and Bengaluru, reflecting strong underlying demand and asset quality in India’s top real estate hubs.

Equity Classification of REIT
In a recent progressive move, SEBI has classified Real Estate Investment Trusts (REITs) as equity for the purpose of inclusion in market indices. This important step marks a significant milestone in strengthening the REIT ecosystem in India. Similar to the reduction in lot size, which SEBI enabled in July 2021, this reform will also help foster greater market participation and position India as a progressive investment destination for institutional investment in yielding assets. “SEBI’s decision to classify REITs as equity for inclusion in market indices is a progressive step that aligns India with global best practices. The move, along with the expansion of the definition of Strategic Investors, will accelerate the next phase of growth for REITs and reinforce India’s positioning as an attractive destination for institutional capital in yield-generating assets, said Ramesh Nair, MD and CEO, Mindspace REIT

Returns and Performance Analysis
REITs and SM REITs generate returns through two main components: Regular Distributions: Rentals from the tenants in REITs are distributed to the investors, creating a stable and regular rental income Potential for Capital Appreciation: As the value of the underlying real estate grows, so does the unit price, thus leading to long-term capital gains Rahul Jain elaborates, “The current REITs have maintained a robust Net Operating Income (NOI) of over ?77 billion in FY2025, distributing over ?60 billion to unitholders. Similarly, SM REITs also provide returns through stable rental income and potential price appreciation of the underlying asset.