Investor Awareness Program:

REITs in India
A Smart Way to Invest in Real Estate

Mahendra Rao
Financial Advisor
NorthStella Wealth Pvt Ltd
29th June 2025
What is REIT?

A REIT, or Real Estate Investment Trust, is a

company that owns, operates, or finances
income-generating real estate. It's essentially
a way for investors to participate in real
estate investments, similar to how they would
invest in stocks or mutual funds. REITs allow
individuals to invest in large-scale,
income-producing properties, such as office
buildings, shopping malls, or apartment
complexes, without having to buy, manage, or
finance the properties themselves.
What is REIT?
Global Presence

As the REIT model has spread globally, current countries and

regions with REITs represent 85% of global GDP, increasing from a
level of 9% in 1990.

In 1990, REIT countries and regions had just a 6% share of global

population, while today they account for 63% of the world’s
population. Asia has driven the growth in population for REIT
countries and regions, most notably with the adoption of REITs in
India in 2014 and China in 2021.
REITs in INDIA
REITs were first introduced in India by the Securities and
Exchange Board of India (SEBI) in 2007, almost 50 years after they
were first incorporated as an investment vehicle.

Subsequently, there were regulations framed to facilitate the

operational functions of these investment funds, which were
revised and reformed after that. REIT companies listed on the
Indian stock exchanges are monitored and regulated by the
Securities and Exchange Board of India or SEBI to ensure
adherence to industry practices and safeguard the interest of the
investors.
 How does a Company qualifies as REIT’s?
To qualify as a REIT, a company has to meet specific requirements as mentioned below.

1. The entity needs to be structured as a business trust or a corporation.

2. Extends fully transferable shares.

3. Is managed by a team of trustees or a board of directors.

4. Must have a minimum of 100 shareholders.

5. Less than 5 individuals should not have held 50% of its share during each taxable year.

6. Is required to pay at least 90% of the taxable income as a dividend.

7. Accrue a minimum 75% of gross income from mortgage interest or rents.

8. A maximum of 20% of the corporation’s assets comprises stock under taxable REIT subsidiaries.

9. A minimum of 75% of investment assets must be in real estate.

10. A minimum of 95% of REITs total income should be invested.

 Why REITs
1. Diversification benefits

2. Liquidity compared to physical real estate

3. Low ticket size (as low as ₹100–₹500)

4. Passive income through dividends

5. Transparency and SEBI regulation

How REITs work in India?
1. Pooling of investor funds

2. Investment in income-generating commercial properties (offices, malls, etc.)

3. Revenue from lease rentals

4. Dividend distribution mandate (90% of net distributable income)

 Key Differences between REITs and Physical Real Estate
REIT and Physical Real Estate are two distinct concepts with utterly different uses, but there is no denying that even if they are opposites, they are two sides of the same coin.

Characteristics REITs Physical Real Estate

Meaning Individuals have the option of investing in large-scale, In a Physical Real Estate investment, you purchase a

income-producing Real Estate through Real Estate specific property or a stake in one, like a residential

Investment Trusts (REITs). apartment building or a retail space (commercial).

A firm that owns and typically manages real estate or Physical Real Estate investors profit from real estate

related assets that generate income is known as a REIT. appreciation, rental income, and profits from any

businesses that depend on the property.

Who Should Invest? Real Estate Investment Trusts (REITs) are a way for Investments in Physical Real Estate are suitable for

investors to diversify their holdings. Thus, Real Estate those who prefer a more individualized experience.

Investment Trusts are an option for investors seeking They gain project experience and a sense of the

assets apart from stocks and bonds. returns from purchasing, managing, and selling the

Investors seeking a consistent income may find REITs property.

appealing because they also regularly pay dividends.

Liquidity Buying and selling units are made Contrastingly, selling Physical Real
simple in REITs as they are traded on Estate property may become difficult
stock exchanges. as the trade can only be made when a
buyer is discovered.

Tax Implications REITs do not provide comparable tax Most buyers of Real Estate prefer to
advantages, and even the dividend finance a home with a mortgage or a
payments on REITs are taxed. loan. As a result, some tax advantages
are available.

Exposure to Diversification The fact that investors in REITs do not For investments in Physical Real Estate,
have to purchase the entire property is investors must purchase the entire
one of the critical aspects of REITs, as property, which is why investors would
investors need to buy the trust units, need an extra lump sum to invest in
which leaves a vast space for them to new real estate.
diversify their portfolio by purchasing
various trust units.
Ownership of Property In this case, investors in REITs are On the contrary, Real Estate grants
not given the title of property investors the freedom to use the
ownership, and they only receive property as they deem fit.
trust units.

Charges and Costs REITs do not incur additional On the other hand, the
expenses. maintenance of physical property
involves several expenses,
including maintenance fees,
property taxes, water taxes,
registration fees, etc.

Income Regular dividend payments are Physical Real Estate does not
made or given by REITs. typically have regular payments
unless it is rented out and
generates a rental income.
Types of REITs
1. Equity REITs (dominant in India)

2. Mortgage REITs (not common in India)

3. Hybrid REITs (future possibility)

Equity REITs
This type of REIT is among the most popular ones. Typically, it is
concerned with operating and managing income-generating
commercial properties. Notably, the common source of income here is
rents.
Mortgage REITs
Also known as mREITs, it is mostly involved with lending money to
proprietors and extending mortgage facilities. Further, REITs tend to
acquire mortgage-backed securities. Mortgage REITs also generate
income in the form of interest accrued on the money they lend to
proprietors.
Hybrid REITs
This option allows investors to diversify their portfolio by parking their

funds in both mortgage REITs and equity REITs. Hence, both rent and

interest are the sources of income for this particular kind of REIT.
Other REITs
# Private REITs

These trusts function as private placements, which cater to only a selective list of investors. Typically, private REITs are not traded on

National Securities Exchanges and are not registered with the SEBI.

# Publicly Traded REITs

Typically, publicly-traded real estate investment trusts extend shares that are enlisted on the National Securities Exchange and are

regulated by SEBI. Individual investors can sell and purchase such shares through the NSE.

# Publicly Non Traded REITs

These are non-listed REITs which are registered with the SEBI. However, they are not traded on the National Stock Exchange. Also, when

pitted against public non-traded REITs, these options are less liquid. Plus, they are more stable as they are not subjected to market

fluctuations.
 Key REITs Listed in India
REIT Name Sponsor Assets Market Cap

Embassy REIT Embassy Group Commercial Offices ₹ 37,131 Cr.

Mindspace REIT K Raheja Corp Business Parks ₹ 25,248 Cr.

Brookfield INDIA REIT Brookfield Asset Commercial Offices ₹ 18,692 Cr.

NEXUS Select Trust Wynford Investments Ltd Shopping Mall, Hotels & Office ₹ 20,934 Cr.
Spaces
Returns & Risk
Returns Equity ( Nifty 50 ) Gold ( Domestic Fixed Income( REITs
Price of Gold ) Deposits)

5 yrs 19.70% 15.90% 7-8% 8–10 % in rental income

plus ~5 % capital
appreciation → total
~13–15 % p.a.

10 yrs 13.34% 13.98% 7-8% NA

15 yrs 11.80% 17.02% 7-8% NA

20 yrs 15.23% 11.40% 7-8% NA

Embassy REIT Performance Snapshot
Metric Value

Current Price ₹ 391

Market Cap ₹ 37,131 Cr.

Listing Date April 1, 2019

Dividend Yield 6.85% (TTM)

5-year price CAGR 5.2% (April 2019 to June 2024)

Total Return ( incl Dividend ) 11% –13% CAGR over 5 years

Return Break Down
Metric Value

Capital Appreciation( Price) 5.2% CAGR

Income (Dividends/Distributions) 6.5–7% annually

Total Return 11%–13% CAGR

How to Invest in REITs

● Through stock exchanges (like shares)

● REIT mutual funds

● Minimum investment amount

● Taxation aspects (dividends, capital gains)

TAXATION (dividends, capital gains)

- Dividend income is taxable for unitholders at applicable slab rates.

- Interest income earned by unitholders from REITs is taxable as per the applicable slab rates.
- Rental income distributed by REITs is taxed at the applicable slab rates to the unitholder.
- 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.
REITs vs Other Asset Classes
Parameter REITs Real Estate Fixed Deposits Equity

Liquidity High Low High High

Diversification High Low Medium High

Ticket Size Low High Low Varies

Returns Moderate High Low High

 FAQs and Myths

● Are REITs safe?

● Can REITs give regular income?

● Are REITs only for HNIs?

● Can I lose money in REITs?

 Summary & Takeaway

● REITs: an accessible, regulated way to invest in India’s booming commercial real estate

● Ideal for long-term wealth creation and passive income

 Real Estate Investment Trust

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