What is REIT?

REIT stands for Real Estate Investment Trust and it is a company that owns or finances income-generating real estate, allowing investors to earn dividends without buying physical property. Globally, REITs manage over $3.5 trillion in assets, with the U.S. market alone accounting for $1.25 trillion. Key advantages include high liquidity (traded like stocks), average dividend yields of 4-6% (higher than many stocks), diversification, and tax efficiency (REITs must distribute 90%+ taxable income). The 3 main types are Equity REITs (80% of the market, owning properties like offices/malls), Mortgage (generate income from loans, with higher volatility), and Hybrid REITs (mix of both). In India, REITs like Embassy and Mindspace have delivered 8-10% annual returns, attracting retail investors.
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15 July 2025

REITs in India

REITs became a reality in India with the launch of the Embassy Office Parks REIT in 2019, marking the first time retail investors could access income-generating commercial property through stock exchanges.

As of November 2023, there are four REITs listed in India:

  • Embassy Office Parks REIT
  • Brookfield India Real Estate Trust
  • Mindspace Business Parks REIT
  • Nexus Select Trust

Together, their combined market capital stands at around Rs. 80,000 crore. These REITs give Indian investors access to quality office parks, shopping malls, and other commercial spaces, offering a steady income through dividends, without the hassle of directly owning or managing property.

While REITs provide exposure to commercial real estate, many investors also consider owning residential property as part of their wealth-building strategy. If you are planning to purchase your dream home, Bajaj Finserv offers competitive rates starting from 7.49%* p.a with flexible repayment options up to 32 years. Check your home loan eligibility today and discover attractive financing options for your property investment. You may already be eligible, find out by entering your mobile number and OTP.

What is a REIT?

Real Estate Investment Trusts (REITs) are companies that own, manage, or finance properties that generate regular income. These properties include shopping malls, offices, apartments, hospitals, and warehouses. REITs allow you to invest in real estate without having to buy or maintain a physical property. They work much like mutual funds by pooling money from different investors and distributing earnings as dividends.

REITs were first introduced in the United States in 1960 to make property investments accessible to everyday investors. Instead of buying an entire building or plot, people could now invest small amounts and still benefit from rental income or interest generated by commercial real estate. Over time, REITs have become an important way to invest in property markets without taking on direct ownership. In this blog, we’ll explain how REITs function, who can invest, what the benefits and drawbacks are, and how you can add them to your financial plan.

Key takeaways of REIT

  • REITs manage or finance real estate that earns rental or interest income.
  • They offer regular income to investors, but do not promise major capital growth.
  • Most REITs are listed on the stock exchange, so buying or selling them is easy.
  • Some REITs are private and are only accessible to high-net-worth investors.
  • Properties covered by REITs include flats, malls, data centres, towers, hotels, and warehouses.

How do REITs work?

REITs generate income primarily through rental income from properties that they own or finance. They must distribute a significant portion of their taxable income to shareholders in the form of dividends, allowing investors to benefit from regular income streams. REITs also derive income from property appreciation, asset sales, and leasing activities. Investors can buy and sell REIT shares on the stock market, providing liquidity and flexibility.

How does a company qualify as a REIT?

To be recognised as a REIT, a company must meet several legal and financial criteria:

  • Must be registered as a company or trust.
  • Should have shares that can be freely traded.
  • Needs to be managed by a board of directors or trustees.
  • Must have at least 100 shareholders.
  • No more than five investors can hold over 50% of its shares in any financial year.
  • At least 90% of taxable income must be paid to investors as dividends.
  • A minimum of 75% of total income should come from rent or mortgage interest.
  • No more than 20% of the firm’s assets should come from taxable REIT subsidiaries.
  • 75% of the company’s assets should be invested in real estate.
  • 95% of the company’s income must come from real estate-related sources.

Types of Real Estate Investment Trust (REIT)

Equity REITs

These are the most common type of REITs. They focus on owning and operating commercial properties such as offices, malls, and apartment buildings. The main source of income is rent paid by tenants.

Mortgage REITs (mREITs)

These REITs do not own properties directly. Instead, they provide loans to property owners or invest in mortgage-backed securities. They earn money primarily from the interest on those loans.

Hybrid REITs

As the name suggests, hybrid REITs combine the features of both equity and mortgage REITs. They offer income from both rents and interest, making them a more diversified investment option.

Private REITs

These REITs are not listed on any public stock exchange and are usually available only to selected or institutional investors. They are not regulated by SEBI and offer limited liquidity.

Publicly Traded REITs

These REITs are listed on recognised stock exchanges such as the NSE and are regulated by SEBI. They can be bought or sold by regular investors through stock brokers.

Public Non-traded REITs

These are registered with SEBI but are not listed on the stock exchange. While they are less liquid than traded REITs, they tend to offer more price stability as they are not influenced by daily market fluctuations.

Advantages of REITs

Here are some benefits of REIT investment:

Diversification

REITs provide investors with exposure to a diversified portfolio of real estate assets across different sectors and geographic locations. This diversification helps mitigate risks associated with individual property ownership and enhances overall portfolio stability.

Passive income

REITs offer attractive dividend yields, providing investors with a steady stream of passive income. Since REITs are required to distribute a significant portion of their income as dividends, they offer higher yields compared to traditional stocks and bonds.

Liquidity

Unlike direct real estate investments, which may require significant time and effort to buy or sell properties, REITs offer liquidity as they are traded on stock exchanges. Investors can easily buy or sell REIT shares, providing flexibility and ease of access to their investment.

Professional management

REITs are managed by experienced professionals who oversee property acquisitions, leasing, and operations. Investors benefit from the expertise of seasoned real estate professionals without having to actively manage properties themselves.

Potential for capital appreciation

In addition to dividend income, REITs offer the potential for capital appreciation as property values increase over time. As the demand for real estate grows and properties appreciate in value, investors can benefit from higher share prices and increased portfolio value.

Many investors who benefit from REIT returns also explore direct property ownership to build a comprehensive real estate portfolio. A home loan from Bajaj Finserv can help you secure your own residential property with loan amounts up to Rs. 15 Crore* and attractive interest rates. Check your loan offers now to see how you can finance your next property purchase. You may already be eligible, find out by entering your mobile number and OTP.

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Limitations of REITs

  • No tax-saving advantage: Dividends from REITs are taxable, so they don’t offer tax deductions like other investments.
  • Market-based risk: Since listed REITs trade on stock exchanges, their prices can go up or down with market trends. Investors must be cautious.
  • Limited capital growth: REITs must distribute 90% of their income, leaving only 10% to reinvest. This limits their potential for future expansion or increase in value.

Who Should Invest in REITs?

REITs generally attract investors with larger capital and long-term financial goals. Big institutions such as pension funds, banks, and insurance companies frequently invest in REITs due to their consistent returns.

Role of REITs in Retirement Planning

Including REITs in a retirement portfolio can be useful for the following reasons:

  • Diversification of assets: REITs allow investors to gain exposure to real estate without directly owning it. They help spread risk and can reduce the impact of poor performance in other investments.
  • Consistent earnings: REITs are required to distribute a large portion of their profits. This helps retirees or long-term investors earn a regular income, even if the property values don’t rise quickly.
  • Ideal for long-term plans: Unlike stocks, which may be affected by short business cycles, REITs follow the property market’s longer cycles, often lasting over 10 years. This makes them suitable for investors with a long-term view.
  • Protection against inflation: Research has shown that REITs perform well during inflation periods, particularly when held for five years or more. This makes them a reliable option to protect against rising prices over time.

Beyond REIT investments, owning your primary residence can serve as an excellent hedge against inflation while building long-term wealth. Bajaj Finserv provides the home financing solution you need with features like no foreclosure charges for individual borrowers and doorstep documentation services. Check your eligibility for a competitive home loan that complements your investment strategy. You may already be eligible, find out by entering your mobile number and OTP.

How to invest in Real Estate Investment Trusts?

Investors in India can access REITs in the following ways:

1. Buying REIT Stocks

You can buy units of listed REITs through stockbrokers, just as you would with shares. This is the simplest and most direct approach.

2. Mutual Funds

Some mutual fund schemes invest in REITs. By choosing these, investors gain access to a diversified property portfolio without directly investing in REIT stocks.

3. Exchange-Traded Funds (ETFs)

ETFs based on REITs work similarly to mutual funds, but they are traded like stocks on exchanges. This offers the benefit of diversification and easy trading.

In many ways, REITs function like mutual funds, but instead of bonds or shares, REITs invest in income-generating property. It’s also advisable to consult a financial advisor before investing to understand the risks and choose the right REIT option for your goals.

Advantages and disadvantages of REITs

Pros

Cons

Easy to buy and sell

No tax-saving benefits

Helps diversify investment

Prices can be volatile due to markets

Regulated and transparent

Slower growth due to high payouts

Balanced returns

Costs such as management fees apply

Regular income via dividends

Other operating charges may apply

 

REITs offer convenience and steady income to investors without needing to own or manage property directly. Their transparency, SEBI regulation, and regular dividends make them attractive to many. However, they come with certain drawbacks like lack of tax benefits, potential fees, and slower capital growth due to limited reinvestment.

Conclusion

In conclusion, real estate investment trusts (REITs) offer investors a convenient and accessible way to invest in the real estate market. However, supplementing your REIT investment with a Bajaj Finserv Home Loan can enhance your investment strategy by providing leverage, diversification, control, tax benefits, and the potential for higher returns. By combining the benefits of REITs with direct real estate ownership, you can build a robust and balanced investment portfolio that aligns with your financial goals and objectives.

Ready to take the next step towards property ownership? Bajaj Housing Finance Home Loan offers loan approval in just 48 hours* with competitive interest rates and flexible tenure options. Check your home loan eligibility now and start building your real estate portfolio alongside your REIT investments. You may already be eligible, find out by entering your mobile number and OTP.

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Frequently asked questions

Are REITs good investments?

REITs can be good investments for those seeking regular income and diversification, especially in real estate. They offer high dividend yields and exposure to real estate markets without requiring direct property ownership. However, they are subject to market volatility and interest rate fluctuations, so careful selection is crucial.

What REITs should I invest in?

Choose REITs based on your investment goals, risk tolerance, and preferred sector. Equity REITs, which focus on property ownership, are ideal for stable income. For higher risk, consider mortgage REITs or hybrid REITs. Research individual REITs' performance, management, and asset quality before investing.

How do you make money on a REIT?

Investors make money on REITs primarily through dividends, as they are required to distribute most of their taxable income. They may also benefit from capital appreciation if the REIT’s property values increase. Regular income from rents and potential asset sales contribute to returns.

Can you lose money on a REIT?

Yes, you can lose money on a REIT due to market fluctuations, property devaluation, or poor management. Interest rate increases or economic downturns can also negatively affect REIT performance. Although they provide steady income, the value of the REIT can drop, leading to potential capital loss.

Are REITs safe during a recession?

REITs may not be entirely safe during a recession as real estate values and rental income can decline. However, some sectors, like healthcare or residential REITs, may be more resilient. Diversifying your investments and focusing on high-quality REITs with stable cash flows can help mitigate risks.

Is a REIT a good investment?

REITs offer a balanced mix of steady income and diversification, making them a useful addition to any long-term investment plan. They can reduce overall portfolio risk and generate reliable dividends. However, they are better suited for long-term investors who are comfortable with market-based ups and downs.

While REITs provide excellent portfolio diversification, many investors also consider direct property ownership for additional stability and tax benefits. Check your eligibility for a home loan from Bajaj Finserv to explore how owning residential property can complement your REIT investments. You may already be eligible, find out by entering your mobile number and OTP.

Which Indian REIT is best?

Popular listed REITs in India include Embassy Office Parks REIT, Brookfield India Real Estate Trust, Mindspace Business Parks REIT, and Nexus Select Trust. Each has a unique portfolio, so the best choice depends on your investment goals and risk appetite.

How can I buy REITs in India?

You can invest in REITs through a stockbroker platform like ICICI Direct. Units can be bought or sold on stock exchanges or subscribed via REIT IPOs. The minimum investment usually starts from Rs. 10,000 to Rs. 15,000.

How can I buy REITs?

Publicly traded REITs can be bought through a broker by purchasing their shares, similar to how you would buy company stocks. Private or non-traded REITs require a financial advisor or brokerage service for access.

Is REIT safe in India?

REITs in India are regulated by SEBI, offering a fair level of investor protection. However, like other stock market investments, REITs are vulnerable to economic changes and market volatility.

Will REITs do well in 2025?

According to J.P. Morgan Research, REITs are expected to grow steadily in 2025 with a 3% earnings increase. Growth may rise to around 6% by 2026, although interest rates and economic conditions may affect performance.

Do REITs pay dividends monthly in India?

Some REITs and banks in India offer regular dividends. While not all REITs pay monthly, many do provide quarterly or periodic payouts, making them appealing for those seeking regular returns.

What is a disadvantage of REITs?

One key drawback is limited capital growth. Since REITs must distribute 90% of their profits, they have less money to reinvest in growth. This can limit their long-term capital appreciation potential.

How to start a REIT?

To launch a REIT, you must form a company or trust, prepare investment documents like a private placement memorandum, secure investors, convert your property business into a REIT, and ensure full legal compliance with SEBI’s regulations.

What is better than REITs?

Real asset funds can offer broader exposure beyond property, including infrastructure or commodities. These may offer better protection against inflation and suit those wanting a more diverse investment portfolio.

Another excellent complement to REITs is direct residential property ownership, which provides tangible asset control and significant tax advantages. A home loan from Bajaj Finserv offers competitive financing with rates starting at 7.49%* p.a and loan amounts up to Rs. 15 Crore*. Check your loan offers today to discover how residential property ownership can enhance your real estate investment strategy. You may already be eligible, find out by entering your mobile number and OTP.

 
How to make money from REIT?

You can earn income from REITs through dividends, which are paid from the rental or interest income the REIT generates. Some REITs may also grow in value over time, providing capital appreciation.

What is the average return of a REIT?

Studies show REITs have delivered average annual returns of 9.7% between 1998 and 2022, often outperforming traditional real estate investments. However, returns can vary based on market conditions and REIT type.

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