All about REITs/InVITs : A Reckoner

Real Estate Investment Trusts (REIT) is basically a pool consisting of income-generating real estate assets that are held similarly to a Mutual fund. Just the way in Mutual funds, with REITs, the investor’s funds are deployed in commercial real estate spaces/assets. Through REITs, retail investors get an opportunity to invest in commercial properties which otherwise, would have just been a distant dream.

Units under this portfolio are sold to investors through a public offer. Once these list on the exchanges, the unitholders can trade the units in the secondary market

Types of REITs.

Equity REITs – Equity REITs basically make money by the owner giving spaces like shopping malls, large office spaces, massive residential townships to tenants on the lease. The income earned is then divided among the REITs investors in the form of dividends.

Mortgage REITs – Here, there is no concept of an owner. There are only finances that are taken against the debt which is taken for the development of the real estate projects. Basically, Mortgage REITs earn income in the form of EMI’s which are then distributed among the REITs investors as dividends.


SEBI requires REITs in India to have a three-tier structure like mutual funds. The sponsor sets up the REIT, the manager runs the portfolio and the trustee is supposed to watch over both.

  • Sponsor – they hold at least 25% in the REITs for 3 years and 15% after that. Their main responsibility is to set up the REIT and appoint the trustee. To ensure that doubtful entities don’t promote REITs, sponsors need to have a minimum net worth of Rs 100 crore and at least 5 years of experience in the real estate industry.

  • Manager – who is a company or an LLP or a body corporate which manages and operates the REIT. A manager has to have at least 5 years of related experience along with other requirements as notified.

  • Trustee – who generally oversees the activities of the REITs who is appointed by the Sponsor.

What is the minimum investment required?

The minimum application value has been cut down to the range of Rs 10,000-15,000 for both REITs and InvITs, compared to the earlier requirement of Rs 50,000 for REITs and Rs 1 lakh for InvITs, Sebi said in two separate notifications dated July 30, 2021. The allotment to unitholders will be in the multiples of the lot size.

However, once listed they can be traded in single units.

Where are the funds invested?

A REIT in India is mainly allowed to invest in completed and revenue-generating assets and other approved investments. Also, REIT has to distribute the majority of the income they produce among the unitholders.

REITs can mainly invest in commercial real estate through two ways – (i) directly and (ii) through a Special Purpose Vehicle (“SPV”) which has to invest more than 80% of their assets in properties.

The remaining 20% can be in under-construction properties, listed or unlisted debt of real estate companies, listed or unlisted equity shares of real estate companies, mortgage-backed securities, g-secs, and money market instruments. If the REIT is being done through an SPV, their ultimate holding in the SPV should be at least 26%.

In terms of leverage, REITs are not allowed to take leverage of more than 49% of their total assets making sure that they are not over borrowing.

How are returns distributed?

Unitholders earn income through rentals received from properties owned by REITs which could be through dividend income, interest income, or capital gains via the sale of units in the secondary market.

The REITs make money through 3 sources:

  1. They receive rent from the commercial properties which have been leased out.

  2. Interest payments from their subsidiaries or SPVs which they have funded to develop the property.

  3. Capital appreciation of their properties.

They are required to distribute 90% of the income they receive to the unitholders. These distributions are mandated once every six months.

What should you be considering before investing in REIT

  • The biggest risk of running a commercial property is the vacancy which is measured in years through Weighted average Lease Expiry (WALE). Higher the time for a property to be vacant, the better.

  • By law, REITs have to pay 90% of distributable cash flows to the investors. The metric to measure this is the distribution yield. Also, this is not a guaranteed payout and depends on the trust performance.

  • A property that is in a prime location will have a high occupancy rate. If the occupancy rate is high, the cash flows are stable.

  • NAV: This is calculated as the estimated market value of all the properties minus the liabilities divided by the number of shares outstanding. NAV provides quite a fair estimation of the REIT performance and its capital appreciation.

How does taxation work in REITs?

There are basically 6 types of scenarios which can be constituted as Income from REITs (interest, dividend and rental, other income, loan repayment by REITs and sale of units)

1. Interest Income:

  • For us residents, It will be taxed at applicable slab rates.
  • For NRIs, the rate of tax is 5%

2. Dividend Income:

There are two categories in this: Qualified and Disqualified Dividend Income

If the Special Purpose Vehicles (SPVs) of the REITs follows concessional corporate tax rate, dividend Income from such SPVs shall be taxed at applicable slab rates or else it is exempt.

However, in most cases it is exempt.

3. Rental income:

It will be taxed at applicable slab rates.

4. Any Other Income Taxable in the hands of the REITs:

Tax is exempted for unitholders.

5. Loan repayment by REITs:

Till the total distributed loan repayment is less than issue price, it can be deducted from the cost of acquisition of units.

Once the total distributed loan repayment is greater than issue price: The excess amount is considered as Income from other sources and taxed at slab rate.

*Earlier, The return of capital was neither taxed in the hands of the trusts nor the unit-holders. The above changes were made as a part of the Amendments to the Finance Bill, 2023

6. Capital gains on sale of units of REIT

  • If the holding period is less than 36 months, STCG is applicable at 15%

  • If the holding period is more than 36 months, LTCG is applicable at 10% without indexation benefit


Similar to REITs, Investment Infrastructure Trusts (InvITs) pools money which is then invested in cash flow generating infrastructure projects such as highways, roads, pipelines etc.


They typically have a 4 tier structure

  • Trustee: These are the debenture trustees which are required to be SEBI registered.

  • Sponsor: Promoter, LLP, or a corporate body with a net worth of atleast 100 crores who sets up the trust and must hold at least 15% of the total InvITs for a minimum of 3 years or as notified by any regulatory requirement.

  • Investment Manager – It is a company or an LLP or a body corporate which basically manages all the business activities surrounding the InvITs.

  • Project Manager – He is responsible for the execution of the project and in the case of PPP, it is the entity formed that has to take care of responsibilities surrounding the execution of the project.

Since the units of REITs & InvITs are listed on the exchange, one can easily buy/sell them in the secondary market.

REITs listed in the exchange

Name Symbol
Brookfield Real Estate Trust BIRET
Embassy Office Parks REIT EMBASSY
Mindspace Business Parks REIT MINDSPACE

InvITs listed on the exchange

Name Symbol
India Grid Trust INDIGRID
POWERGRID Infrastructure Investment Trust PGINVIT


Thank you for a very detailed and informative post. It is simple to understand as well. I was not much aware about REITs till now.

Once again thank u so much @Value_investor

1 Like

Thank much

1 Like

Thanks. Does Zerodha have REITs ? How to invest. Just buy like stocks ? Please suggest some good ones.

Every broker has reits. You buy it just like shares. The 3 available reits are Embassy Office Park, Mindspace and Brookfield. Previously minimum investment was 50,000, but now I think you can buy even one share of these, I just bought one share of Embassy few days back.


Taxation is not as simple as explained above. Payouts by REITs have multiple components. Out of those components only interest is taxable in the unit holder’s hands, rest all components including dividends are tax free…


Totally agree. Only to add

This is true only if the REIT has not opted for concessional tax regime.
All 3 listed REIT have not opted for concessional tax regime, so dividend is tax free for all 3 of them. But in future REITs, this may or may not be the case.

Wanted to understand if managing your returns filing at the end of the year gets complicated if you invest in Indian REITS.

I guess they split your earnings into capital appreciation , dividends, interest and rents, with each having its own tax treatment. Is this info provided in the form of a statement to each investor?

Can someone who has actually invested in a REIT help me understand the mechanics of this ?

Yes it gets slightly complicated, if you are comparing with plain old interest from FD kind of scenario.

But every REIT quarterly provides a statement of what they have paid, split between each component and its taxation.
For eg. below is snapshot of what I got from Brookfield for last quarter:

As you can see total distribution of Rs. 3000 (specific to me) is divided in 4 components. One is taxable (intrest) and TDS is deducted on it. Remaining three are tax free.

They also provide Form 16 for tax deducted.
I will be using this info to determine my taxable income and report accordingly.

Hope this helps.


Visualizing the REITs Universe

Source :


Any idea how many investors having currently invested in REITs in india?

1 Like

Comparison of REITS

Source Internet


Latest SEBI circular on REITs / InvITs

  • Real Estate Investment Trust (REIT) having net worth of INR 100 Crore or higher are eligible to issue commercial paper

  • InvIT having net worth of INR 100 Crore or higher are eligible to issue commercial paper.

1 Like

What was the rule before? Did they decrease the net worth requirement?

100 crores is a small number considering the sector, considering the size of the country.

Reits can certainly be one part of the portfolio. It gives you exposure to the real estate sector and allows you to earn regular income. But the income itself can fluctuate quite a lot and can go up and down.

1 Like

There was no rule before regarding issuing commercial paper. Now, any REITs/InvITs with networth above 100 crore can issue them, this was done considering the fact that globally, REITs have been issuing commercial paper already thereby following global standards.

Yes. that makes it better for even smaller players (100 crore and above) as they can also participate in issuing CP .

1 Like

Business will increase considering the small requirement, and so will the risks, as the sector is cyclical and is known for unfinished projects.

This is true for real estate sector in general, but not necessarily for REIT.

REITs are supposed to be holding 80% of their corpus in income generating assets (finished projects), only 10% of total corpus can be invested in under construction project.
Also, Rental income for commercial properties are not cyclical, more like linear income. Most of these contracts are long term with periodic escalations built in.

For example, during COVID lockdowns (which was biggest disruption to Commercial real estate sector), all listed REITs continued to get similar cashflows, and there was hardly any cyclical effect visible in any of the 3 listed REIT.


Yes I have read about listed REITs.

There is a difference between supposition and requirement, requirement is law, supposition is kind of giving a leeway.

My thoughts and concern was about the small net worth requirement, which will make hundreds of small REITs issuing CP, and the occurrence of mutual fund houses buying these CP, and some REITs not able to pay in time or defaulting. Of course fund houses can and for the most part do their due diligence, and don’t buy every player that issues CP but still. I was thinking from the perspective of a debt fund investor.

Envisaging a hypothetical scenario :grin:

1 Like

Not sure if I understand what part you are referring to as supposition and what part as requirement. But holding 80% in finished project is requirement and not supposition.

Regarding your hypothetical scenarios and concerns, I don’t think you really understand what this latest circular is about. Let me give you some background.

These are the RBI requirements for someone to be eligible to issue CP

As you can see any company (including all real estate companies) and basically any entity which has 100+ cr networth is eligible to issue CP. When these rules were made, REIT did not exist and so were not included in it.

What this latest circular does is add REITs in the list too so they are treated at par with every other institution which is eligible to issue CP.

First, till now there are only 4-5 registered REIT in India (of which 3 are listed), not sure which hundreds of REIT not able to pay in time , you are worried about.

Second this is also possible for thousands of companies (and all other entities) both small and big. Why are you worried only about REIT?

If we keep on building hypothetical scenarios, we will have to close down all forms of financial activity. :slight_smile:

1 Like