Reits and the promise of big money

For real estate investment trusts, the India story is just beginning 

 

The popularity of real estate investment trusts (Reits) is on the rise in India, according to industry watchers and players even as the instrument vies for a spot as a mainstream investment option. India was a late entrant in the Reits space. Currently, India has five publicly listed Reits Brookfield India Real Estate Trust, Embassy Office Parks Reit, Mindspace Business Parks Reit Nexus Select Trust, and Knowledge Realty Trust. Together, they manage assets under management (AUM) of Rs 2.25 trillion and have a combined market capitalisation of more than Rs 1.5 trillion as of August 2025, according to the Indian Reits Association (IRA). Having allowed the investment instrument only in 2014, India is relatively behind other major global markets. The first Reit was issued in 2019. But according to some senior executives, at least one new Reit is expected to be launched annually over the coming three to five years. Upcoming Reits include Blackstone backed Bengaluru developer Bagmane, which is planning a Rs 4,000 crore Reit initial public offering, as per Moneycontrol. Another is DLF-GIC joint venture firm DCCDL, which houses all of DLF rental assets of office space and malls, according to the company. However, the company said it has no immediate plans. 

 

Another is reported to be a Blackstone, Sattva Group and Panchshil Realty backed Reit. On the purely retail side there is Phoenix Mills, which recently acquired Canadian investor CPPIB’s shares in its subsidiary Island Star Mall Developers Private Ltd. It said in an investor presentation that the move opened up the way for monetisation through a possible Reit. Globally, Reits have been used as an investment instrument since 1960, and major markets like the US, Australia, Japan, UK, and Singapore have the larger share of funds raised through Reits. In all, there are over 1,000 listed Reits across 40 countries with a market cap of $1.9 trillion. But in India, they remain on the sidelines still. “The journey of Reits in India has just begun,” said Alok Aggarwal, chairman of IRA and managing director & CEO of Brookfield India Real Estate Trust. Crucially, the sector’s annual distribution yields, at 6-7.5 per cent, “beat global peers, outpacing even the US, Singapore, or Japan,” added Aggarwal. These are not speculative windfalls, but sustainable returns combining stable rental income and capital appreciation. “Reits remain a favourable instrument for many investors, particularly those looking for diversification, rental yield plus asset-class exposure to real estate without owning buildings themselves,” said Anuj Puri, chairman of property consultants Anarock Group, pointing to headroom for growth: of the 520 million sq ft of Reitable completed, income-generating office space stock in the country’s top cities, only 23 per cent are listed so far. 

Cumulative distributions by the five Reits have surpassed Rs 24,300 crore since 2014, with ₹1,559 crore paid out in Q1 FY26 alone, a 13 per cent increase year over- year, data from IRA showed. For the full financial year 2024-25, the cumulative distribution by the five Reits reached Rs 6,070 crore, up from Rs 5,366 crore in FY24, a year-on-year growth of 13 per cent. Reits are mandated to distribute at least 90 per cent of their taxable income. According to the Securities and Exchange Board of India (Sebi), Reits have to mandatorily undertake a public listing on the Indian exchanges. The five listed Reits held more than 175 million sq ft of Grade-A office and retail space as of Q1FY26. With occupancies for major listed players climbing from the low 80 per cent range to high 80s, projections indicate the figure could exceed 90 per cent soon. India’s office market is poised to cross 1 billion sq ft to become the fourth-largest, after China, the US and Japan, according to Amit Shetty, CEO of Embassy Reit, as demand from global capability centres and leading corporates continues to outpace supply across key markets. According to industry insiders, pension funds and the insurance sector are now looking at Reits as an investment option, which will further broaden the investor market. 

 

“For investors, the Reit opportunity in India is immense Reits today represent just 19 per cent of the listed real estate universe and 0.4 per cent of the overall stock market, compared to 98 per cent and 2 per cent in the US,” added Shetty. “Over the next five years, we see India’s listed Reit exposure easily doubling to over $50 billion, led by the continued expansion of high-quality, income-generating office assets and the rise of new office, retail, data center, and hospitality Reits.” For the average investor, Reits can feel like an odd hybrid traded on stock exchanges like equities but also providing regular distributions akin to fixed income. “In practical portfolio construction, investors should not box Reits into debt or equity but view them as a ‘real asset’ allocation a basket of institutional- grade real estate that provides both income and long-term growth,” said Aggarwal. Under the Indian tax framework, dividends distributed by Reits are taxexempt, giving Reits an edge over direct equity in many cases. 

 

If the upside for Reits looks so good, why are only a handful of them in the market? Puri points to one key reason: “Given that Reits are at a very nascent stage, there is limited awareness about them and their benefits. Several retail investors see Reits as just real estate instruments and not as equity portfolio. The country’s Reits ecosystem is still dominated by commercial office assets.” Lata Pillai, senior MD and head of capital markets India at JLL said that the concept of owning a fractional interest in commercial real estate portfolios was still new to investors accustomed to direct property investments or traditional equity or debt instruments. “Currently, institutional investors dominate India’s Reit market, with retail participation occurring primarily through mutual funds rather than direct retail investors,” she added. Executives in the industry also point to the mountain of legal work it takes for a real estate company to move to a Trust structure, more so if it is listed. “Reits are fully regulated instruments by Sebi, and are subject to inspections by regulators. Trusts are required to give quarterly results, annual reports and valuation reports every six months, besides other disclosures,” a senior executive added. 

Reits are now classified as equity instruments following a September 2025 reclassification by Sebi, which has implications for mutual funds, market participation, and liquidity. Previously considered hybrid instruments, they now count towards the equity allocation for mutual funds, potentially boosting their attractiveness and enabling their inclusion in equity indices. “This reclassification is expected to significantly increase market liquidity and broaden investor participation, as more mutual funds will be able to invest in them,” said JLL’s Pillai. Industry executives hope that treating and marketing Reits as equities for investment by mutual funds would enable wider adoption. The move is expected to deepen liquidity, strengthen index presence, and help investors better recognise the total-return profile of Reits. The first wave of Reits focused on Grade-A office properties (with one retail Reit), but the future map looks broader. “Looking ahead, the boom in e-commerce and quick commerce means warehousing will be a key focus, including last-mile assets. 

 

India’s data centre market is expected to grow to over $100 billion by 2027, driven by 5G, increasing AI adoption, and focus on cloud computing,” Aggarwal pointed out. Anarock estimates the retail Reit market could reach ₹60,000-80,000 crore by 2030 around 30-40 per cent of India’s overall Reits market. Diversification of Reits is expected through data centres, logistics Reits and more. Pillai noted that besides the office segment in tier 1 and 2 cities that had untapped potential, the logistics and warehousing sectors, which are currently under the InvIT (infrastructure investment trust) category, hospitals, medical office buildings, diagnostic centres, senior living facilities and student housing and co-living sectors were positioned for near-term Reit development given their scale, investor familiarity, and established operational frameworks. 

The participation of retail investors in Reits is yet to match institutional enthusiasm. Taxation on dividend distributions can dampen post-tax yields for some investors. And experts flag another risk: Market concentration. “Currently, out of the five listed Reits in India four are office-focused while only one is retail. Thus, it is concentrated in just one segment and if it spreads across segments then we may see some shift for larger adoption,” said Puri.