India's economic ascent is increasingly anchored in its rapidly evolving real estate ecosystem. As urbanisation accelerates and the services economy matures, the demand for institutional-grade office spaces, retail hubs, and mixed-use developments is rising. The market size of Indian real estate is projected to reach US $1tn by 2030, increasing the sector's GDP contribution from 7.3% to 15.5%. This expansion is being fuelled by a robust demand for quality office infrastructure, growing Global Capability Centres (GCCs), a strong government push for formalisation, and India's rise as a global outsourcing and consumer hub.
Notably, GCCs play a key catalyst in the real estate industry transformation: India is now home to ~ 1,600 GCCs, with projections suggesting this number could exceed 2,000 by 2026, according to NASSCOM. These centres are driving demand for premium office real estate beyond metros into Tier 2 cities, creating a sustained requirement for high-grade commercial spaces. Simultaneously, government reforms and policy pushes have formalised the real estate sector. These include the Real Estate (Regulation and Development) Act (RERA), the Goods and Services Tax (GST) regime, and 100% FDI allowance in construction and development projects.
At the heart of this evolution lies the Real Estate Investment Trust (REIT)—a regulated vehicle that enables individuals to invest in real estate assets that offer rental income and property value growth, such as office spaces, malls, and commercial properties. Investors benefit through regular rental income and potential capital gain on large-scale property assets by purchasing listed units on stock exchanges instead of directly buying real estate.
In this article, we deep dive into REITs and how they are increasingly becoming a crucial part of both the economic and investment landscape.
A closer look at the REIT attraction
The evolving interest of HNIs and UHNIs in commercial real estate is well-documented. Reportedly, 45% of UHNIs now favour commercial real estate over residential. Their preferences are shaped by higher rental yields, longer lease tenures, and better institutional-grade governance frameworks. For many HNIs, this hybrid model provides a diversified, managed exposure to high-quality real estate without the operational overheads of direct property management.
SEBI’s amendments in the 2024 regulations to tighten oversight and enhance investor safeguards across REIT structures further offer compelling a bridge between the risk-reward profile of direct ownership and the liquidity and transparency of listed instruments. Some key changes include:
- Enhanced grievance redressal: Investors can now lodge complaints through SEBI’s SCORES platform, ensuring timely and structured resolution.
- Fractional ownership regulation: SEBI has mandated that all Fractional Ownership Platforms (FOPs) must register and comply with defined transparency and operational norms—closing regulatory gaps that previously left investors exposed.
- Subordinate units framework: Clear provisions now govern the issuance of subordinate units (with reduced voting rights) by sponsors and related parties, helping protect minority investor interests.
SEBI’s recent regulatory amendments to permit the creation of Small & Medium REITs—with a reduced minimum asset size of INR 50 crore and a lower entry ticket of INR 10 lakh—has democratised the space. While this change invites a broader pool of retail and emerging investors, it also enables HNIs to allocate capital in a more staggered and strategic manner, rather than through large, illiquid investments.
How REITs are enabling access to individual investors
REITs have long been a gateway for investors to participate in institutional-grade real estate across sectors—office, industrial, retail, logistics, hospitality, healthcare, and residential. Whereas globally, REITs account for nearly 60% of listed real estate value, they represent only around 12% of listed real estate in India. Nonetheless, India’s journey with REITs has shown promising potential since the first REIT listing in 2019.
India has an estimated 400 million square feet of REIT-eligible office space and 70 million square feet of REIT-eligible retail space. However, together, REITs in India own 115 million square feet of commercial office and retail space comprising a market cap of $10 billion. Among the top seven cities, Mumbai and Delhi NCR contribute nearly 50% of the small and medium REIT (SM-REIT) eligible assets, followed by Bengaluru and Hyderabad, which account for 15% and 11%, respectively. This underscores the potential that the investors have yet to explore in the fairly nascent but growing asset class.
Today, there are four publicly listed REITs in India, namely Brookfield India Real Estate Trust, Embassy Office Parks REIT, Mindspace Business Parks REIT, and Nexus Select Trust, operating primarily in the office and retail segments.
India's first REIT, Embassy Office Parks REIT, raised around INR 4,750 crore through a listing in 2019. The second was Mindspace Business Parks, which raised around INR 4,500 crore in an IPO in 2020. The success of India’s first listed retail REIT in 2023, Nexus Select Trust, has opened the doors for more developers and asset owners to explore the REIT route. Despite a post-pandemic hybrid work environment, the institutional demand for high-quality office and retail assets remains resilient, further catalysing the expansion of India’s REIT ecosystem.
Why REITs offer the best of both worlds
Historically, Indian investors have looked at real estate largely through the lens of capital appreciation. REITs, however, provide an alternate investment lens—focused on steady income through rental yields. For instance, India’s four publicly listed REITs distributed a total of INR 6,070 crore to unitholders in FY24, reflecting a healthy 13% year-on-year growth in payouts.
In the March quarter alone, distributions exceeded INR 1,553 crore, benefiting over 2.64 lakh unitholders—an uptick from the INR 1,377 crore disbursed during the same period in the previous fiscal. Accordingly, REITs are offering performance that competes favourably with other asset classes, particularly in the current high-interest-rate environment.
Exhibit - REITs Key Numbers
| Metric | FY24 | FY25 |
|---|---|---|
| Total distribution to unitholders | INR 5,366 crore | INR 6,070 crore |
| Q4 FY25 distribution | INR 1,377 crore | INR 1,553 crore |
| Gross AUM (as of May 2025) | INR 1,63,000 crore | |
| Combined market capitalisation (as of May 2025) | INR 98,000 crore |
Tax-efficiency of REITs
REITs offer a tax-efficient way to invest in income-generating real estate. Key features include:
- Benefits of Pass-through taxation: Income generated by REITs, such as rental income and dividends from Special Purpose Vehicles (SPVs), is only taxed at the investor level, not at the REIT level. This helps avoid double taxation.
- Dividend tax exemption: If SPVs have paid the corporate tax, dividends distributed by REITs are exempt from taxation in the hands of the investor, making them an efficient income-generating asset.
- Favourable capital gains: Gains from REIT units are taxed at a lower LTCG rate of 10% after a one-year holding period making it more favourable.
The future of REITs in a changing investment landscape
As India continues its economic transformation, REITs are poised to play a far more integral role in bridging the infrastructure funding gap. For investors, particularly HNIs, REITs offer a way to align portfolios with the broader India growth story, while balancing risk, liquidity, and returns. Indeed, today’s discerning investors seek more than access; they value informed guidance that contextualises such instruments within their overall wealth journey.
The ability to thoughtfully incorporate REITs into a customised framework, based on individual risk profiles and objectives, is fast becoming a marker of mature and future-ready wealth advisory.
