Do you know how to invest in REITs in India? It’s quite simple; you can buy shares of publicly traded REITs through stock exchanges just like you would with any other stock. They also offer diversification, liquidity, and growth potential. REITs cover various property sectors like commercial, residential, and industrial real estate.
Before that, let’s understand what REITs are.
Table of Contents
What is REIT?
REITs (Real Estate Investment Trusts) are companies that own, manage, or finance income-generating real estate. They provide a way for individuals to invest in large-scale real estate without needing to buy properties directly. REITs generate income through rent or lease payments from properties and are required to distribute at least 90% of their taxable income as dividends. This makes them attractive for income-focused investors.
REITs can be publicly traded on major stock exchanges, offering a convenient and liquid way to invest in real estate. By investing in REITs, you can benefit from professional management, diversification, and the potential for both income and capital appreciation.
How do REITs Work?
- Capital Raising: REITs raise funds by issuing units (similar to shares) on stock exchanges, allowing retail and institutional investors to participate.
- Property Acquisition: The raised funds are used to acquire or develop income-generating properties like offices, malls, and warehouses, focusing on high-quality assets in prime locations.
- Income Generation: REITs earn revenue through rental income and other sources like parking fees and maintenance charges from their properties.
- Income Distribution: At least 90% of the income is distributed to unit holders as dividends, ensuring regular and stable returns for investors.
- Stock Market Trading: REIT units are listed and traded on stock exchanges, offering liquidity and enabling investors to buy or sell units easily.
- Professional Management: REITs are managed by professionals who oversee property acquisition, leasing, and maintenance while diversifying portfolios to reduce risks.
- Taxation and Compliance: REITs benefit from tax exemptions, providing tax-efficient income to investors, and are regulated by SEBI in India for transparency and investor protection.
- Exit Options: Investors can sell REIT units on stock exchanges to gain from both dividends and potential capital appreciation over time.
How to Invest in REITs in India
- Open a Demat Account: Ensure you have a Demat and trading account with a broker registered with the stock exchange.
- Research Available REITs: Study the REITs listed on Indian stock exchanges like NSE or BSE. Analyze their portfolio, past performance, dividend history, and market reputation.
- Set an Investment Budget: Decide how much you want to invest based on your financial goals and risk tolerance. Note that the minimum investment amount in REITs can vary.
- Place a Buy Order: Search for the REIT by its ticker symbol in your trading account. Enter the number of units you wish to buy and confirm the order.
- Monitor Your Investment: Track the performance of your REIT investment periodically. Keep an eye on dividends, unit prices, and updates about the REIT’s portfolio.
- Receive Dividends: Enjoy regular income from dividends distributed by the REIT (typically quarterly).
- Exit When Needed: Sell your REIT units on the stock exchange whenever you want to liquidate or rebalance your portfolio.
Listed REITs in India
- Embassy Office Parks REIT: India’s first publicly listed REIT, owning and operating a portfolio of high-quality office assets across Bengaluru, Pune, Mumbai, and Noida.
- Mindspace Business Parks REIT: Includes five integrated business parks and five premium independent office spaces, with a total leasable area of 32.3 million square feet.
- Brookfield India REIT: Focuses on commercial office spaces in key Indian cities.
- Nexus Select Trust: Specializes in retail and commercial real estate.
- 360 One REIT: Offers a diversified portfolio of commercial properties.
Best REITs in India
| Parameter | Embassy Office Parks REIT | Mindspace Business Parks REIT | Brookfield India Real Estate Trust REIT |
| Total Leasable Area | 51.1 million sq ft | 32.3 million sq ft | 20.7 million sq ft |
| Key Cities | Bengaluru, Pune, Mumbai, Noida | Multiple cities | Key Indian cities |
| Occupancy Rate | 83% | 83.80% | 87% |
| Weighted Average Lease Expiry (WALE) | 6.9 years | Not specified | 7.1 years |
| Market Capitalization | ₹45,711 Cr | ₹21,842 Cr | ₹17,580 Cr |
| Dividend Yield | 2.98% | 3.50% | 4% |
| Average Dividend (last 5 years) | ₹27.38 per share | ₹19.76 per share | Not specified |
Frequently Asked Questions
Are REIT investments regulated in India?
Yes, SEBI regulates REITs, requiring them to invest 80% in completed properties and distribute 90% of net income to investors.
Are REIT dividends taxable in India?
Yes, dividends are tax-free if the REIT hasn’t availed tax benefits. Otherwise, they’re taxed as per the investor’s income slab.
What is the minimum investment required for REITs in India?
The minimum investment during IPOs is ₹10,000-₹15,000. On exchanges, units typically cost ₹300-₹500 each.
How do REITs generate returns for investors?
REITs generate returns through rental income (dividends) and capital appreciation from unit value growth.
What factors should I consider before investing in REITs?
Check the property portfolio, occupancy rates, management reputation, dividend history, and market trends.