The story regarding India's real estate and infrastructure investment has changed in a quiet but firm way over the last few years. Now, because of SEBI-regulated instruments such as Real Estate Investment Trusts (REITs), Small and Medium REITs (SM REITs) and Infrastructure Investment Trusts (InvITs), investors are able to obtain a regular income from offices, highways or power assets—without having to buy the property or directly fund the projects. These vehicles combine the predictability of real assets with the convenience and transparency of the stock market.
Their growing appeal is showing up in the numbers. Data from ICRA Analytics indicates that distributions by listed REITs and InvITs jumped 34.3% quarter-on-quarter to over Rs 3,300 crore in Q2 FY26, a sharp 55.4% rise from a year ago. Better asset utilisation, higher rentals and stronger toll collections drove the increase. REITs led the way, with distributions rising nearly 50% sequentially as office leasing and collections improved. Road InvITs also benefited from higher traffic during the festive season, while power and energy InvITs continued to deliver steady, predictable payouts.
REITs
Listed REITs can provide diversification and stability through exposure to good quality commercial properties without assuming the property risk. Units of listed REITs typically trade between ₹100 and ₹400 and are suitable for investors willing to invest in high-quality commercial real estate without taking property-level risk. Being structured with long leases and rent escalations, these securities are suitable for investors looking for stable income.
SM REITs
Launched in 2024, SM REITs are structured to suit the needs of investors looking to invest directly in income-generating commercial properties. While the investor invests in the unit of a pool of listed REITs, an investor can purchase units of selected individual assets, which need to have a value between ₹50 crore and ₹500 crore and should be constructed and fully occupied. However, the return generated by this product will depend on the performance of the single property, and hence, it is essential to conduct thorough due diligence of the location, tenant and management. This is a suitable product for more experienced investors willing to take concentration risk.
InvITs
Investor trusts (InvITs) are suitable for investment in infrastructure assets like highways, power transmission lines and renewable energy projects. The income earned from the trust is usually generated from either toll or regulated tariffs, which tend to be stable as compared to equity markets. The yields of InvIT are generally higher than the yield from REITs, and investors need to consider the fact that these infrastructure assets have a life span and hence depreciate over time.
Combining REITs, SM REITs and InvITs
As per Nandaka real asset advisory experts, together, REITs, SM REITs and InvITs are positioned somewhere between equity and fixed income, providing diversification and regular cash flows. "The Nifty REIT and InvIT Index has generated close to 13% annualised returns since 2019 with lower volatility compared to equities.
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