Understanding REITs: Investing in Real Estate Without Buying Property
Investing in real estate has always been considered a secure way to build wealth. However, traditional property investments come with challenges like large capital requirements, property management, and illiquidity. Real Estate Investment Trusts (REITs) solve these problems by allowing investors to own a share of income-generating real estate assets without purchasing physical properties.
What Are REITs?
A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-producing real estate. REITs pool money from investors and use it to acquire and manage real estate properties such as office buildings, shopping malls, warehouses, and residential complexes.
How REITs Work
- Acquiring Properties: REITs invest in high-value commercial and residential properties.
- Generating Income: They lease these properties to tenants and collect rent.
- Distributing Profits: A significant portion (at least 90%) of the income is distributed to investors as dividends.
For example, if a REIT earns ₹100 crore annually from its properties, at least ₹90 crore is distributed among its shareholders.
Why Invest in REITs?
- Affordable Access to Real Estate: REITs enable investments starting as low as ₹10,000, unlike traditional real estate requiring crores.
- Regular Income: REITs distribute rental income as dividends, ensuring steady returns.
- Liquidity: As listed entities, REIT units can be bought and sold on stock exchanges.
- Professional Management: REITs are managed by experienced professionals, reducing operational burdens for investors.
Top REIT Options in India for 2025
1. Embassy Office Parks REIT
Portfolio: Premium office spaces across Bengaluru, Mumbai, and Pune.
Performance: Delivered a 24% return since its launch in 2019.
Dividend Yield: ~7.5% annually.
2. Mindspace Business Parks REIT
Portfolio: Office spaces catering to IT and ITES companies in Hyderabad, Pune, and Chennai.
Performance: Provided a return of 18% since its inception.
Dividend Yield: ~7% annually.
3. Brookfield India Real Estate Trust
Portfolio: Office properties in Mumbai, Gurgaon, and Noida.
Performance: Moderate growth of 6% since launch.
Dividend Yield: ~8% annually.
4. Nexus Select Trust REIT
Portfolio: Retail properties like malls and shopping centers.
Performance: A standout performer with a 39% return since its listing.
How to Invest in REITs in India
Investing in REITs is simple:
- Through Stock Exchanges: Purchase REIT units on NSE or BSE using your Demat account.
- Participate in IPOs: Buy units at the offering price when new REITs are launched.
Taxation on REITs
REIT income is categorized into three components:
- Dividends: Tax-free if declared from rental income but taxable from other sources.
- Interest Income: Taxed as per the investor’s income tax slab.
- Capital Gains: Short-term gains (holding < 36 months) are taxed at 15%; long-term gains are taxed at 10%.
Real-Life Case Study: How REITs Work for Investors
Scenario: Ramesh, a 35-year-old investor, wanted to diversify his portfolio but lacked funds for direct real estate investment.
Solution:
- Invested ₹2 lakh in Embassy REIT in 2021.
- Earned ₹14,000 annually as dividends (7% yield).
- His investment grew to ₹2.48 lakh in 2025 (24% appreciation).