REITs and InvITs in India: A Guide to Investing in Real Estate Without Direct Ownership

Introduction

As India opens its doors to more innovative investment vehicles, REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts) are emerging as powerful ways for individuals to tap into real estate without owning a property. By March 2024, these instruments had mobilized over ₹1.3 lakh crore, illustrating growing traction among investors (Source: RBI, April 2024). As of mid-2025, REITs alone have crossed a ₹1 lakh crore market capitalisation threshold (Source: Economic Times, July 2025). In a market where owning property can be capital-intensive, these trusts offer a transparent and liquid alternative. This guide unpacks how REITs and InvITs work in India, their benefits, risks, and how even beginners can integrate them into a smart investment portfolio.

Understanding REITs and InvITs: The Basics

REITs pool capital to invest in commercial real estate, office buildings, retail centers, even warehouses. They are professionally managed, listed on stock exchanges, and legally required to distribute at least 90% of net distributable earnings to investors (Source: 1Finance, 2025). Meanwhile, InvITs invest in infrastructure assets, such as roads, power grids, transmission lines offering similar income distribution mechanisms (Source: Business Standard, 2025).

India’s REIT ecosystem, though modest, is maturing: three office REITs and one retail REIT currently manage over 105 million sq ft of Grade A office space, collectively delivering north of 15% capital appreciation in the past year (Source: Cushman & Wakefield, June 2025). InvITs are also witnessing rapid expansion assets under management are projected to triple to ₹21 trillion by FY2030 (Source: Business Standard, June 2025). You might also like to checkout The Home Selling Checklist

Why Indian Investors Should Consider REITs and InvITs

For many, the appeal lies in real estate exposure without hassles. Unlike owning a flat—dealing with repairs, tenants, and paperwork—these trusts offer liquidity (they’re listed on exchanges), professional management, and diversification across assets.

Moreover, REITs and InvITs bring better tax efficiency and mandatory income distribution. For example, SEBI requires REITs to pay out 90% of their earnings. That stability, combined with dividend-like income, makes them attractive for investors seeking predictable returns (Source: 1Finance, 2025).

The regulatory environment is strengthening: SEBI has proposed increasing mutual funds’ exposure to such trusts from 10% to 20% of NAV (Source: Reuters, April 2025), while another proposal aims to allow institutional investors like pension funds to become strategic investors in REITs and InvITs (Source: Reuters, August 2025). These reforms can boost liquidity and legitimacy, making the instruments more appealing to mainstream investors. Also read The Unseen Influence of Local Infrastructure Projects on Property Values: A 2025 Indian Playbook

How to Invest in REITs and InvITs in India

Investing is relatively straightforward. Listed REITs like Embassy Office Parks, Mindspace, and Brookfield India REITs are available through demat trading via brokerages or platforms like ICICI Direct (Source: ICICI Direct). InvITs such as IRB InvIT or India Grid Trust operate on the same framework, with units available similarly.

Paper-based IPOs occasionally appear, Knowledge Realty Trust has received SEBI approval for a ₹4,800 crore REIT IPO (Source: Times of India, July 2025), opening the chance for early access. Alternatively, investors can tap into these through mutual funds with exposure to REITs and InvITs once SEBI’s proposal for higher allocations becomes official. You can also read our blog on hidden charges in home loans.

Comparing Asset Classes: REITs, InvITs, Real Estate

While physical property is an emotional and familiar asset, REITs and InvITs reduce the friction. They deliver professional management, steady income, and are easier to liquidate.

For example, in FY25, InvITs distributed ₹24,267 crore in payouts and projected returns of 12–14% (Source: Business Standard, FY25). This consistency may outperform some rental yields, especially in cities where returns are capped at 2–4%.

On the other hand, during strong markets, REITs outperform traditional indices. Indian office REITs, for instance, beat the BSE Realty Index over a 12-month period (Source: Cushman & Wakefield, June 2025). Portfolio-wise, combining REITs and InvITs adds sector and level diversification—commercial property and infrastructure income in one basket. For more sustainable innovations, check out Green Buildings.

Potential Risks to Consider

Despite the advantages, no investment is risk-free. REIT and InvIT units are subject to market volatility and interest rate cycles. For instance, a rise in rates can depress valuations, impacting dividend yields and unit prices.

Asset quality matters, rental agreements in REITs may expire or tenants may default; InvITs tied to usage-based toll roads or power lines depend on operational volume.

Regulatory proposals are promising, but not yet enacted. Until mutual funds increase exposure or strategic investor participation is clarified, depth and liquidity remain limited. Also check out Fractional Ownership of Real Estate in India 2025

Conclusion

In India’s evolving investment landscape, REITs and InvITs stand out as accessible, managed, and effective ways to earn passive income from real estate and infrastructure. With market capitalizations ramping up and policy reforms on the horizon, they offer both yield and liquidity—unlike owning physical property. For readers seeking simplicity, diversification, and steady cash flow, starting small with listed REITs and InvITs is a smart move. Over time, these instruments may earn their place as core components of balanced, future-ready portfolios.

Frequently Asked Questions

Q1. What is the minimum investment in REITs and InvITs? You can start with as low as one unit through your brokerage account usually costing a few hundred rupees, making them accessible for retail investors.

Q2. Are REIT and InvIT dividends taxable? Yes, income is taxable in the hands of the investor; however, distributions through InvIT debt can be taxed differently. Always check current tax rules on the Income Tax India portal.

Q3. How do REITs differ from InvITs? REITs invest in income-generating real estate assets like offices and malls, while InvITs focus on infrastructure assets like roads, power transmission, and pipelines (Source: India Wikipedia).

Q4. Can mutual funds invest in REITs and InvITs currently? Currently, equity mutual funds can allocate up to 10% of NAV to these trust units. SEBI has proposed increasing this to 20%, pending approval (Source: Reuters, April 2025).

Q5. How has India’s REIT market performed this year? By mid-2025, REITs have delivered over 15% capital appreciation and collectively crossed a ₹1 lakh crore market cap (Source: Cushman & Wakefield; Economic Times).