REITs Explained: Hassle-Free
Real Estate Investing
18 Sep 2025
Real
Estate Investment Trusts (REITs) are companies or trusts that own, operate, or
finance income-producing real estate. Think of a REIT as a portfolio of
properties – like office buildings, shopping malls, apartments, warehouses, or
hotels – that you can invest in by purchasing units. Much like a mutual fund
pools money to buy stocks or bonds, a REIT pools investors’ capital to buy and
manage real estate assets. In return, investors receive a portion of the income
those properties generate (primarily rents), typically through regular distributions.
REITs
offers the best of both worlds: they provide regular income like fixed-income
instruments through distributions, while also offering the potential for
capital appreciation as their market prices rise due to price appreciation of
assets—offering capital gain like equities.
Beyond
this dual advantage, REITs stand out across several dimensions. they can be
traded on stock exchanges just like stocks. They also enhance portfolio
diversification, thanks to their low correlation with traditional asset classes
such as equities and bonds. Investors benefit from a high degree of
transparency, as REITs are regulated, audited, and required to publicly
disclose their financials. Perhaps most importantly, REITs make real estate
investments highly accessible, allowing individuals to invest in real estate
with relatively modest capital—often just a few hundred rupees.
REITS can be of multiple
types:-
1. Office REITs
Invest
in commercial office buildings; generate income from long-term leases with
corporate tenants.
2. Retail REITs
Own
shopping malls, high-street retail, and large-format stores; income depends on
consumer footfall and retail health.
3. Industrial REITs
Focus
on warehouses, logistics parks, and distribution centres, benefit from
e-commerce and supply chain growth.
4. Residential REITs
Invest
in apartment complexes and rental housing, common in markets with strong urban
rental demand.
5. Hospitality REITs
Own
hotels and resorts; income is variable and linked to tourism and business
travel.
6. Healthcare REITs
Invest
in hospitals, senior living facilities, and medical offices; often have long
leases and stable tenants.
7. Data Centre &
Infrastructure REITs
Own
digital infrastructure like data centres, cell towers, and fibre networks;
benefit from tech and cloud growth.
Having
understood the appeal of REITs as an investment offering both income and
growth—it’s worth exploring how this asset class is evolving, especially in
India.
India’s
REIT journey began in 2019 with the listing of Embassy Office Parks REIT.
Currently, India has five listed REITs: Embassy Office Parks REIT, Mindspace
Business Parks REIT, Brookfield India REIT, Nexus Select Trust (India’s 1st
Retail Focused REIT) and Knowledge Realty Trust.
The
stocks/sectors mentioned do not constitute any kind of recommendation and are
for information purpose only. Kotak Mahindra Mutual Fund may or may not hold
position in the mentioned stock(s)/sector(s).
Majority
of the REITs are focussed on Grade A office spaces, especially in IT and BFSI
hubs. In fact, India is one of the leading Office Market in the world. Grade A
office spaces are premium commercial properties located in prime areas, built
to high specifications, and managed professionally, typically leased by
top-tier corporate tenants.
Since
the early 2000s, office stock has grown by more than 35 times from
approximately 25 msf in CY2000 to approximately 887 msf as of March 31, 2025,
and is concentrated in the Top 7 cities. Indian real estate has emerged as a
preferred investment asset class due to various factors such as the healthy
growth of the economy, favourable demand-supply fundamentals, investor-friendly
policies, rental growth opportunities, strong demographic profile and increased
transparency.
Source:
Knowledge Realty Trust DRHP, Msf – Million square feet
Source:
CBRE; as of March 31, 2025; Area mentioned is Gross Floor Area; Includes Top 7
Cities (Bengaluru, MMR (Mumbai), Delhi- NCR, Hyderabad, Chennai, Pune and
Kolkata) + GIFT City, Ahmedabad; Refer to disclaimers on forecasts and
assumptions on page 88 of this “Industry Overview” section. | P refers to
projected
India’s
key office markets continue to offer significantly lower rentals and capital
values compared to assets of similar scale and quality in global commercial
hubs. This pricing advantage makes Indian commercial real estate highly
attractive for investors, especially when combined with strong demand
fundamentals and institutional-grade asset quality.
Source:
CBRE, As of 31 March 2025, As per latest data available; Note: Class A rentals
used for US; APAC markets include Effective Grade A rental values while prime
rentals have been used for European markets
Source:
CBRE, As of 31 March 2025, As per latest data available; Capital values of
European markets include prime values; US markets include all grades, while
APAC markets include Grade A values India’s REIT market, while still young and
relatively small, is on a strong growth trajectory. Sustained corporate
expansion across diverse sectors such technology, BFSI, life sciences,
semiconductors, etc is poised to stimulate multi- sectoral office space leasing
activity further nationwide. With only a handful of listed trusts—primarily
focused on office assets—there is significant room for expansion into new
property types such as warehouses, hospitals, and data centres, etc.
Logistics REITs: Riding the
Manufacturing Wave
India’s
manufacturing sector is evolving from low-value to high-value goods, driving
demand for advanced storage and distribution infrastructure. Warehouses are no
longer just storage hubs—they’re becoming tech-enabled logistics centres,
integrated with automation, cold chain systems, and last-mile connectivity.
This transformation makes logistics assets ripe for REIT inclusion.
Retail REITs: Reinventing the
Store
The
role of physical retail is changing. Stores are no longer just transactional
spaces—they’re becoming experience centres, blending offline and online
channels. With rising consumption and organized retail expansion, retail REITs
can offer exposure to high-footfall malls and lifestyle destinations, backed by
long-term leases and stable tenants.
Data Centre REITs: Powering
the Digital Backbone
As
India accelerates its transition into a digital-first economy, driven by the
growth of IT, telecom, and cloud infrastructure, demand for data centres is
expected to surge. These assets offer long-term contracts, high operating
margins, and strong tenant stickiness—making them a promising frontier for
future REIT expansion in India.
Source:
Reit.com, expresscomputer.in , CBRE, KMAMC Internal India’s REIT market, while
still in its early stages, is expanding rapidly driven by sustained corporate
growth, urbanization, and sectoral diversification. But this story doesn’t
exist in isolation. It’s unfolding against the backdrop of a global REIT landscape
that’s entering a favourable cycle, especially as central banks begin to ease
interest rates.
Globally,
REITs are a major force in real estate investing. They own over USD 4.5
trillion worth of properties - more than 535,000 buildings across offices,
malls, warehouses and more. First introduced in the U.S. in 1960, REITs have
grown into a mainstream asset class, now active in over 40 countries with a
combined market value of USD 2 trillion+.
Source: www.reit.com
Historically, REIT returns
move in the opposite direction of long-term rates, as lower rates reduce
borrowing costs and make REIT distribution more attractive compared to bonds.
Global REITS Relative to
Global Equities against the 10-Year Treasury Yield
Source: Bloomberg, As per
latest data available. Past performance may or may not be sustained in future.
What
makes global REITs particularly interesting now is the macro backdrop. As major
central banks pivot toward rate cuts after an aggressive tightening cycle.
For example: In September 2025, the U.S. Federal Reserve cut rates for
the first time this year, Real estate, an interest rate sensitive sector is
entering a potentially favourable phase. Lower borrowing costs can boost
property valuations and improve REIT earnings, while steady distribution
payouts continue to attract income-seeking investors.
Global REITs offer far broader
exposure than India’s current REIT landscape. While India focuses mainly on
office and retail assets, global REITs span diverse sectors:
- Data Centres & Digital Infra – Fuelled
by AI, cloud, and 5G.
- Healthcare & Life Sciences – Backed by
aging populations and biotech.
- Industrial & Logistics – Driven by
e-commerce and supply chain shifts.
- Residential & Student Housing – Linked
to urban growth and demographics.
- Hospitality & Leisure – Riding the
wave of global travel recovery.
The
U.S. leads the global REIT market, followed by Japan, Australia, Singapore and
Europe. Asia-Pacific REITs are gaining ground, offering access to fast-growing
economies and niche property themes.
REITs
are no longer niche. They’re mainstream, resilient and income-generating.
Whether you're a millennial investor or a retiree seeking passive income, REITs
offer a smart way to tap into real estate without the hassle. REITs bring real
estate investing to everyone - making it as easy as buying a stock, but as
rewarding as owning a property.
