REIT or Real Estate Investment Trust is a company that owns, operates or finances income-producing real estate. REITs allow individual investors to invest in real estate without directly buying or managing properties. REITs own many types of commercial real estate like offices, residential units, hotels, shopping centers, warehouses, etc.

• REITs were introduced in India in 2014 through SEBI (Real Estate Investment Trusts) Regulations. They are regulated by SEBI (Securities Exchange Board of India).


• REITs must be publicly listed to trade on stock exchanges like BSE and NSE in India. This allows retail investors to buy and sell REIT units freely based on their investment needs.


• REITs are required by SEBI to distribute at least 90% of their net distributable income as dividends to unit holders. This generates stable income and higher yields for investors.


• REITs in India can invest only in completed revenue-generating properties. Under-construction properties are not allowed according to SEBI guidelines. This reduces risks for investors.


• Minimum public float for REITs is 25% of total units. Sponsor or controlling entity must hold a minimum of 15% of units for at least a year after listing. These rules ensure adequate liquidity and security for public investors.


• REITs must invest not less than 80% of their assets in completed and rent/income generating properties. Maximum 10% can be invested in under-construction properties and 15% in listed/unlisted debt of real estate companies. This limits speculative investing by REITs.


• REIT units are tax efficient. Income is taxed in the hands of unit holders, so REITs can claim deductions for interest and depreciation related to the properties. Capital gains from sale of units after 3 years attract no tax for unit holders.


• Some examples of listed REITs in India are Embassy Office Parks REIT and Mindspace Business Parks REIT which invest in commercial office properties. More REITs covering other property segments are expected to list soon.

• Easy liquidity: Can be easily traded on stock exchanges unlike direct property investment.


• Stable income: Must distribute most of their income as dividends. This provides steady cash flows to investors.


• Professional management: By experienced REIT managers. Properties are actively monitored and managed. This expertise may not be available to small investors.


• Limited liability: Like any company, REITs provide protection from liability beyond the investment amount. The risk is not directly linked to individual properties as with outright purchase.


• Diversification: REITs own multiple properties across locations, reducing risks related to any single property. This level of diversification may not be possible for most retail investors.


• Tax efficiency: Income and capital gains are taxed favorably compared to other investments. This enhances the overall yield or return for investors.