Real Estate Investment Trusts
- Meghna DM
- 12 hours ago
- 4 min read
REITs, or Real Estate Investment Trusts, are companies that own and manage real estate properties to earn income. These companies handle high-value properties, such as offices, malls, or apartments, and generate money by leasing them out. The rent collected from these properties is then shared with shareholders as income or dividends. REIT stocks allow shareholders to indirectly own a portion of the real estate portfolio managed by the REIT. In India, REITs are regulated by the Securities and Exchange Board of India (SEBI).
Types of REITs in India
Equity: Equity REITs primarily focus on running and overseeing commercial buildings that produce income. Rent is a major source of income in this area, making REITs in India a popular investment choice.
Mortgage: Mortgage REITs, commonly known as “mREITs,” are associated with lending money to proprietors and extending mortgage facilities. These SEBI-registered REITs earn income by charging interest on the funds they lend to business owners.
Hybrid: Hybrid REITs allow investors to diversify their portfolios by investing in both equity and mortgage REITs.
Private REITs: Private REITs are real estate funds or companies that are not traded on national securities exchanges and are not registered with the SEBI REITs regulations in India.
Publicly traded REITs: Real estate investment trust shares are traded on the National Securities Exchange and registered with the Securities & Exchange Board of India.
Public non-traded REITs: Non-traded REITs that are publicly traded are not traded on the National Stock Exchange but are registered with SEBI.
REIT’s vs. Direct Property
Basis | REIT | Direct Property |
Ticket Size | Low | High |
Liquidity | High | Low |
Diversification | High | Low |
Tax Benefits | Limited | 30% standard deduction and home loan benefits |
Management | Professional | Self-Managed |
Procedure to invest in REITs
Open a Demat and trading account with a stockbroker.
Research REIT stocks listed in India.
Analyse financial metrics such as occupancy rate, dividend yield, and debt levels.
Place a “Buy” order through your trading platform.
How Do REITs Work?
Investors purchase units of a REIT listed on stock exchanges.
The REIT owns and manages commercial properties.
Rent collected from tenants generates income.
At least 90% of distributable income is paid out as dividends (as per regulatory norms).
Investors earn through:
Regular dividend income
Capital appreciation
Pros and Cons of investing in REIT’s
Pros | Cons |
Low capital requirement compared to buying property | Sensitive to interest rate changes |
Regular income through mandatory distributions | Returns depend on real estate market cycles |
High liquidity (listed on stock exchanges) and transparent (regulated by authorities like Securities and Exchange Board of India) | No tax-benefits |
Diversification across multiple properties | Vacancy risk reduces rental income |
Professionally managed assets | Capital appreciation may be slower than direct real estate |
India's Listed REITs - Quick Snapshot──────────────────────────────── Embassy Office Parks REIT Focus: Office Parks Key Cities: Bengaluru, Mumbai, Pune, Noida Highlight: Strong dividend distribution track record  ──────────────────────────────── Mindspace Business Parks REIT Focus: Grade-A Business Parks Key Cities: Mumbai, Hyderabad, Pune, Chennai Highlight: High-quality IT and corporate tenants  ──────────────────────────────── Brookfield India Real Estate Trust Focus: Premium Commercial Office Assets Presence: Major metro cities Highlight: Backed by global asset manager Brookfield  ──────────────────────────────── Nexus Select Trust Focus: Retail Malls Model: Consumption-driven rental income Highlight: India’s first listed retail-focused REIT  ──────────────────────────────── |
Returns - Direct Property (Residential & Commercial) vs. REIT
Direct Property - Residential
City | Annual Return |
Mumbai | 8–12% |
Bengaluru | 10–15% |
Pune | 9–13% |
Hyderabad | 12–16% |
Direct Property - Commercial
Type | Annual Return |
Office | 10–14% |
Retail | 8–12% |
REIT
Mindspace Business Parks REIT | 32.36% |
Brookfield India Real Estate Trust | 22.96% |
Nexus Select Trust | 20.94% |
Embassy Office Parks REIT | 16.31% |
Taxation (As on 1.3.25)
1. Dividend Income
If the SPV opts for the concessional tax rate regime under Section 115BAA, dividend income is taxable for unitholders at applicable slab rates. If the SPV does not opt for the concessional tax rate regime under Section 115BAA, the dividend income is exempt for unitholders.10% TDS will be applicable for dividend paid to resident unitholders if the amount exceeds ₹5,000 p.a. (₹10,000 p.a. from FY 2025-26 onwards)
2. Interest Income
Interest income earned by unitholders from REITs is taxable as per the applicable slab rates.
3. Capital Gains
Short-Term Capital Gains (STCG): Gains from selling REIT units held for less than one year are taxed at 20%. Long-Term Capital Gains (LTCG): Gains from selling REIT units held for more than one year are taxed at 12.5% if they exceed ₹1.25 lakh annually. Indexation benefits are not available.
4. Rental Income
Rental income distributed by REITs is taxed at the applicable slab rates to the unitholder.10% TDS is deducted on rental income.
Notes
REIT income is generally pass-through, meaning income is taxed in the hands of the investor, not at trust level under most cases .
TDS may be deducted on interest and dividends when distributed.
LTCG first ₹1.25 L per year is tax-free on listed market investments like REIT units; above that, gains are taxed at 12.5% plus cess and surcharge.
Conclusion
REITs have opened up real estate investing to a wider set of Indian investors by removing the traditional barriers of high capital, illiquidity, and operational hassles. However, like any investment, REITs are not risk-free. Returns are influenced by interest rates, occupancy levels, and broader real estate cycles. In essence, REITs serve as a simplified, diversified, and relatively tax-efficient gateway to commercial real estate.
