What is a REIT and How to Get Started in India?

A Real Estate Investment Trust (REIT) is an investment vehicle that allows individuals to pool their money and invest in income-generating real estate assets such as office spaces, malls, warehouses, and other commercial properties. Much like mutual funds, REITs enable retail investors to access highvalue real estate without owning or managing the properties themselves. REITs are traded on stock exchanges, making them a liquid and transparent way to invest in real estate.

Why Should You Consider REITs in India?

India’s REIT market is growing rapidly, driven by the increasing demand for commercial real estate. The Securities and Exchange Board of India (SEBI) introduced regulations for REITs in 2014, which provided a framework for these investments. In India, REITs must allocate at least 80% of their assets to completed properties, with the remaining 20% potentially invested in underconstruction projects or other financial instruments. Moreover, they are required to distribute 90% of their net distributable cash flow as dividends to unit holders, making them attractive for income-seeking investors

Today, India has three publicly traded REITs—Embassy Office Parks, Mindspace Business Parks, Brookfield India REIT, Nexus Select Trust and 360 One REIT. The total market capitalisation of these listed REITs exceeds ₹75,000 crores, and is expected to grow further due to urbanisation and the expansion of commercial properties. According to JLL India, the REIT-eligible office stock in India is estimated to exceed 300 million sq. ft. by 2025.

How to Get Started?

Karan Shetty, Co-Founder, Claravest Technologies suggests the following 4 steps to begin investment in REITs in India:

1. Open a Demat Account: You need a Demat account to trade REITs, just like stocks.

2. Research REIT Options: Evaluate the performance, asset portfolio, and dividend yield of available REITs.

3. Invest via Stock Exchange: Purchase REIT units through the NSE or BSE. The minimum investment is affordable for retail investors, starting from ₹10,000-₹15,000.

4. Track and Diversify: Keep an eye on your investment performance and diversify your portfolio across different REITs if possible.

Small and Medium REIT (SM REIT):

Small and Medium Real Estate Investment Trusts (SM REITs) are a new category of investment vehicles introduced by the Securities and Exchange Board of India (SEBI) to broaden access to real estate investments for retail investors. Launched in 2024, SM REITs aim to democratise real estate participation by allowing them to list real estate asset sizes between 50 crores and 500 crores. Additionally, the latest listing by PropertyShare reflects the growing trend of fractional ownership in real estate. In conclusion, REITs represent a compelling investment option for those looking to diversify their portfolios and gain exposure to the booming Indian real estate sector without the complexities of direct property management. With ongoing regulatory support and innovative approach like SM REITs, the future looks promising for retail investors in India’s real estate landscape.