Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) are regulated investment vehicles in India that allow retail and institutional investors to gain exposure to real estate and infrastructure sectors without directly owning or managing physical assets.
REITs invest in income-generating commercial properties like offices, malls, and warehouses, while InvITs focus on revenue-generating infrastructure projects such as highways, power transmission lines, and pipelines.
Both are listed on stock exchanges like NSE and BSE, and are overseen by SEBI for transparency and investor protection. They must distribute at least 90% of their taxable income as dividends, making them appealing for income-focused portfolios.
Whether an Indian investor should invest in them depends on factors like risk tolerance, investment horizon, and portfolio diversification needs. They can be suitable for those seeking steady income and long-term growth, but they come with market-linked risks. Here are the advantages and disadvantages based on current market conditions:
REITs have gained popularity in India since their introduction in 2019, with assets under management growing significantly by 2025.
REITs
Provide steady dividend income (typically 6-8% yield) from rentals, plus potential for capital appreciation over time. However, dividends are taxed at the investor's slab rate with 10% TDS, reducing net returns; no special tax benefits like those for direct real estate.
Low entry barrier with minimum investment around ₹50,000 per lot, allowing small investors to participate without buying full properties.
Subject to market volatility, including property value fluctuations and interest rate changes that can impact borrowing costs and valuations.
Enable portfolio diversification into commercial real estate; professionally managed, reducing operational burdens.
Limited growth prospects in saturated markets; cash flow issues if occupancy rates drop. It has high degree of transparency (thanks to SEBI) and good liquidity by listing on the stock exchanges. The risk of lower rentals if the economy does badly surely remains.
What about InvITs?
Introduced in 2014, target infrastructure assets and have seen strong performance in 2025, often outperforming benchmarks like the Nifty due to India's infrastructure push
InvITs offer stable, predictable cash flows from long-term contracts like tolls or power purchase agreements. It has higher risk from project-specific issues, such as delays, cost overruns, or regulatory changes; political risks can affect infrastructure projects more than real estate. Allows investment in large-scale infra projects with minimum lot size around ₹1,00,000.
Dividends and interest taxed at slab rates and no pass-through tax benefits for capital gains.Provides diversification into essential infrastructure; professionally managed with focus on completed, revenue-generating assets.Lower liquidity compared to REITs, as trading volumes are often thinner due to long-term project nature.
Listed on exchanges for reasonable liquidity; SEBI oversight ensures transparency and investor safeguards.Sensitive to interest rates and economic cycles; potential for lower returns if contracts underperform.
REITs and InvITs can be a good addition to an investor's portfolio for diversification, especially amid rising real estate and infrastructure demand.
They are not risk-free and may not suit aggressive growth seekers or those with low risk appetite. Consider them if you prioritize regular income (e.g., retirees) for long-term exposure to these sectors.