Published on Aug 06, 2025
Have you ever walked past a big office space or a mall and thought, “Wish I could invest in something like that?”. Well, the answer is “Yes,” and you can do it through REITs.
What is a REIT (Real Estate Investment Trust)?
A REIT is similar to a Mutual fund, but instead of investing in stocks, it invests in real estate. It collects money from investors and uses it to buy or lease income-generating properties like office space, shopping malls, warehouses, etc.
In return, the REIT receives rental income and, as mandated by SEBI, has to distribute at least 90% of its Net Operating Income (NOI) to investors in the form of dividends, thereby offering investors a steady income stream. The rental income has to be distributed to the investors at least twice a year
In India, REITs are listed on the stock exchanges, just like shares. So, you can buy and sell them anytime.
What is a REIT IPO?
A REIT IPO (Initial Public Offering) is when a REIT offers its units (similar to shares) to the public for the first time. Once listed, the units of the REITs trade on the stock exchange just like shares.
| REIT Name | Listing Year | Focus Area | Assets (mn sq. ft.) | Occupancy | FY25 Distributions (₹/unit) |
|---|---|---|---|---|---|
| Embassy REIT | 2019 | Office parks | 45.3 | 86% | ₹21.0 |
| Mindspace REIT | 2020 | Business parks | 32.1 | 90%+ | ₹21.4 |
| Brookfield REIT | 2021 | Office/SEZs | 25.8 | 89% | ₹18.8 |
| Nexus Select Trust | 2023 | Retail malls | 9.8 | 94% | ₹11.0 |
| Knowledge Realty Trust (KRT) | Listing Aug 2025 | Grade-A Offices | 48 (planned) | ~90% (expected) | TBA |
The “FY25 Distributions (₹/unit), means the expected payout per unit that a REIT will distribute to its unitholders during the financial year 2024–25 (FY25).
Let us understand this by an example, REITs are traded just like stocks, but instead of shares, you buy “units”. So, when a REIT announces ₹20/unit as FY25 distribution, it means you will receive ₹20 for each unit you hold, the amounts is spread across 4 quarterly payouts or as per the interval announced by the REIT.
Benefits of Investing in REIT IPOs
Here are the benefits of investing in REIT IPOs for retail investors.
1. Regular Income
REITs pay you part of the rent they receive. For investors, it is like owning a piece of rental property, without becoming a landlord or maintaining it.
2. Diversification
It gives you a chance to invest in real estate without buying property.
3. Liquidity
You can buy/sell REIT units on the stock market, just like shares.
4. Better Than FDs?
Many REITs offer better returns than FDs, with rent prices increasing, payouts for investors can be expected to increase over time.
5. Professional Management
The properties are maintained by experts. As an investor, you don’t have to worry about repairs or tenants.
Real Estate vs. REIT: Which Is Better?
| Factor | Physical Real Estate | REITs |
|---|---|---|
| Entry Cost | ₹50 lakh+ | ₹10,000–₹15,000 |
| Liquidity | Low | High (via exchange) |
| Maintenance | Your headache | Handled by REIT |
| Rental Income | Irregular, less stable | Stable and regulated |
| Diversification | Difficult | Easy (many properties) |
| Tax Complexity | Moderate | Slightly complex |
How Do REITs Compare to FDs, Gold & Stocks?
| Investment Type | Return Potential | Risk Level | Liquidity | Income Flow |
|---|---|---|---|---|
| REITs | 6%–8% | Moderate | High (listed) | Quarterly/half-yearly |
| FDs | 6%–7.5% | Low | Medium | Monthly/quarterly |
| Gold | 5%–8% (long-term) | Low–Moderate | High (via ETFs) | No regular income |
| Equity (stocks) | 10%+ (long-term) | High | High | Depends on company |
REITs provide a middle ground; they provide better returns than FD, the volatility is lower than stocks, and the liquidity is better than physical real estate.
How Do You Earn Returns from REITs?
There are two ways you can earn from REITs.
- Regular Income: SEBI mandates that REITs have to distribute 90% of their net rental income as payouts (called distributions or payouts). The payout has to be done quarterly or semi-annually. CRISIL has forecasted 5–10% annual rental escalation in major office markets.
- Capital Appreciation: Since REITs are listed on the stock exchanges, they trade like any other listed stock. If the property value increases, the REIT’s share price may rise.
Are REITs Safe to Invest In?
SEBI regulates REITs, and it is mandatory for them to be transparent, have regular disclosures, and distribute 90% of their net rental income to investors.
Most Indian REITs lease to blue-chip clients like Google, Accenture, and TCS, thereby ensuring stable rent inflows.
However, REITs are not without risks, which include.
- Decline in commercial property demand.
- Since REITs are traded on the exchange, the prices of the REITs can go up or down
- An increase in interest rates can make REITs less attractive than FDs.
- If the occupancy in these rental properties is sub-optimal, then the rental income will dip.
Upcoming REIT IPO – Knowledge Realty Trust (KRT)
This is the largest REIT IPO in India to date.
Here are the details:
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Sponsor: Blackstone (global giant) + Sattva Group
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IPO Opens: August 5, 2025
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Closes: August 7, 2025
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Price Band: ₹95–₹100 per unit
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Lot Size: 150 units (~₹15,000 minimum)
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IPO Size: ₹4,800 crore
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Portfolio: 29–30 office properties
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Completed Area: ~37 million sq. ft.
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Cities: Bengaluru, Hyderabad, Chennai, Pune, etc.
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Use of Funds: Loan repayment (to reduce debt)
KKT has raised ₹1,400 crore in a pre-IPO round from institutional investors, thus showing strong demand.
How Can Retail Investors Invest in REITs in India?
When it comes to investment, REITs are similar to stocks. You can invest in REITs in two ways.
- IPO: When a REIT is launched, it comes with its Initial Public Offering (IPO). Retail investors can apply for the units of the REIT.
- Stock Market: After the listing of the REIT, you can directly buy or sell on the stock exchange.
Taxation of REIT Income in India
Dividend Income
- If the REIT has paid tax at the SPV (Special Purpose Vehicle) level, then the dividend is tax-free for investors.
- However, if the REIT has opted for the concessional tax regime (Section 115BAA), then the investor has to pay tax on the dividend income as per the tax slab.
Note: Please consult your tax advisor for more information.
Capital Gain Tax
Capital Gain Tax depends on the holding period.
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Long-Term Capital Gains (LTCG): More than 12 months – Taxed at 12.5% on gains above ₹1.25 lakhs
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Short-Term Capital Gains (STCG): 12 months or less – Taxed at 20%
Final Thoughts – REITs in India
REITs are not a get-rich-quick scheme; they offer a balanced investment option, with regular income, low entry barrier, and exposure to premium real estate.
So, if you are looking to diversify beyond FDs and Equity, then REITs can be a great addition to your portfolio.
About the Author
Sandip Desai is a stock market professional with over 18 years of experience in the Indian broking and investment space. He holds NISM certifications in Equity Derivatives, Currency Derivatives, Commodity Derivatives, and Mutual Fund Distribution. Sandip is passionate about simplifying financial concepts and helping investors navigate IPOs and capital markets with confidence.
Disclaimer
This article is for educational and informational purposes only. It reflects the author’s personal views based on experience in the Indian stock market. Please consult a SEBI-registered investment advisor before making financial or investment decisions.