In the Indian investment landscape, real estate investment trusts (REITs) have steadily gained traction and are finding a place in investors’ portfolios. Broadly, investors have expressed satisfaction with the performance of these business trusts. At a recent India Infrastructure conference, leading REIT platforms shared their experience with REITs, the current state of liquidity and trading volumes, key challenges, and the potential measures to enhance market participation. Excerpts…
What is the nature and scale of your business trust?
Abhishek Agrawal
Embassy REIT is India’s first publicly listed REIT and Asia’s largest office REIT by area. Embassy REIT owns and operates an over 50 million square foot (sq. ft) portfolio of 14 premium office parks in India’s best-performing office markets of Bengaluru, Mumbai, Pune, the National Capital Region (NCR) and Chennai, and is home to over 270 of the world’s leading companies.
“Investors today have greater familiarity with the REIT product, having seen it perform across economic cycles, including the pandemic and interest rate volatility.” Abhishek Agrawal
Preeti Chheda
Mindspace REIT operates a 38 million square foot portfolio, largely concentrated across southern and western India. As the second REIT in the country, we manage about Rs 380 billion of assets under management (AUM). The portfolio comprises primarily office properties and data centres.
“REITs have addressed a critical gap by combining characteristics of both fixed income and equity products.” Preeti Chheda
Rajesh Deo
Nexus Select Trust is the first listed retail REIT in India, and the fourth REIT overall in the country. Our business model is that of mall acquisition. We own and operate 19 malls across 15 cities spread across 10.6 million square foot, and are one of the leading retail platforms in India.
“REITs have contributed to professionalising the real estate sector by aggregating institutionalgrade assets under established fund managers, enhancing the industry’s reputation and credibility in the investment marketplace.” Rajesh Deo
Pratichi Mishra
S&R Associates is a legal firm that does not have REITs, but provides advisory services to REITs, and also helps the Securities and Exchange Board of India (SEBI) with policy matters.
“REITs have evolved to become fully accessible to retail participants, seeking to achieve parity with equity markets in terms of investor eligibility and market access.” Pratichi Mishra
What has been the experience so far?
Abhishek Agrawal
The regulator, SEBI, has been very supportive of the REIT structure, right from introducing REIT regulations in 2014 to playing a pivotal role in the evolution of the sector over the past six years, making it more accessible to retail investors.
As the first listed REIT, we had a first-mover advantage in many ways, as we were able to work very closely with the regulators to lay the groundwork for REIT listings.
REITs have helped democratise commercial real estate by opening Grade A office assets to retail investors with entry points as low as Rs 150-Rs 400. This has reshaped the investor mix. Foreign portfolio investors remain a dominant category in our investor base while domestic institutional investors have grown, now accounting for 25-30 per cent of the investor base. The most recent REIT listing reflected this shift, with increased participation from HNIs and family offices alongside a more balanced institutional component.
Investors today have greater familiarity with the REIT product, having seen it perform across economic cycles, including the pandemic and interest rate volatility. The asset class has demonstrated resilience–over the past 12-18 months, REITs have delivered total returns of 17-18 per cent, outperforming the NIFTY and underscoring the sector’s steady maturation.
Preeti Chheda
Six years since the launch of India’s first REIT, which is Embassy REIT, the sector has demonstrated substantial growth, with combined market capitalisation exceeding Rs 1 trillion, excluding the most recent addition. While the journey has only begun and will require time to achieve the scale and investor outreach of established investment products such as mutual funds, the progress achieved by these instruments so far has been significant. The real estate landscape comprises approximately 800 million square foot of office assets, of which 450 million square foot qualify as REIT-eligible. The five existing REITs collectively manage between 175-200 million square foot.
REITs have addressed a critical gap by combining characteristics of both fixed income and equity products. REITs deliver regular income alongside capital appreciation. Over the past five quarters, all REITs have clocked healthy growth in both net operating income (NOI) and distributions. Talk of the Mindspace REIT, it has expanded from a portfolio of 30 million square foot to 38 million square foot via acquisitions over the past five years, while delivering approximately 15 per cent total returns to unitholders.
Rajesh Deo
Nexus Select Trust commenced operations in 2015 with the acquisition of two malls in Ahmedabad and Amritsar. Through systematic acquisitions, the portfolio has expanded to establish the trust as India’s largest mall owner. As part of Blackstone, the organisation employs an acquisition-focused model, differentiating itself from competitors who typically build properties from the ground up. So, the strategy centres on acquiring under-managed, under-leased and under-marketed malls, turning them around, integrating them into the portfolio and then making strategic exits, just like funds do.
Over time, REITs have contributed to professionalising the real estate sector by aggregating institutional-grade assets under established fund managers, enhancing the industry’s reputation and credibility in the investment marketplace.
Pratichi Mishra
The foundation for India’s first REIT listing in 2019 was established via the earlier work on infrastructure investment trusts (InvITs). The InvIT regulatory framework, released in 2014, required substantial groundwork, including enabling provisions for foreign investment and corporate structural exceptions. From a regulatory perspective, the product’s positioning has undergone significant transformation from a regulatory perspective. Initially designed exclusively for institutional and sophisticated investors, REITs have evolved to become fully accessible to retail participants, seeking to achieve parity with equity markets in terms of investor eligibility and market access.
What are some of the key challenges? How can these be overcome?
Abhishek Agrawal
Strengthening institutional participation remains a priority, Especially from domestic institutions such as mutual funds, insurers, and public and private pension funds. While major private insurers are already invested in REITs, some have only recently begun investing and public sector insurers have not yet entered the space. Therefore, there is meaningful potential for growth.
At the same time, expanding retail participation is equally important. REITs provide an accessible avenue for retail investors to deploy capital and benefit from India’s commercial real estate growth story. Although retail presence is already visible, increasing engagement from this segment will help deepen the investor base and further strengthen the overall market ecosystem.
Preeti Chheda
The most significant challenge has been repositioning REITs as growth-oriented investments rather than purely income-generating instruments. Listings coinciding with the Covid-19 pandemic created unfavourable conditions, as work-from-home dynamics constrained growth potential for approximately three years. During this period, distributions remained relatively flat. The past five to six quarters have demonstrated growth through healthy distributions. Performance metrics now substantiate the dual-benefit value proposition that had been articulated from the beginning. Retail investor education remains important. Concurrently, our efforts now focus on expanding institutional participation from pension funds and insurance companies via regulatory engagement.
Rajesh Deo
Regulatory requirements, environmental clearances and licensing approvals have been the principal challenges that can extend the listing timelines when going public.
Pratichi Mishra
Liquidity and trading volumes have emerged as primary investor concerns in recent years. Enhanced retail participation and increased allocations from insurance companies, pension funds and the Employees’ Provident Fund Organisation (EPFO) are essential to address trading volume limitations. Concurrently, the sector has also navigated frequent policy adjustments over the past three years.
Index inclusion represents a critical priority for attracting passive investment flows. While REITs are incorporated in global equity indices, they remain excluded from Indian indices. The sector has engaged with SEBI on this matter for approximately two to three years, with the regulator having issued a consultation paper for the same. Subsequently, SEBI has issued enabling amendments to the mutual fund regulations to reclassify REITs as equity instruments.
What kind of investors are you currently looking for? What measures will you take to enhance their participation?
Abhishek Agrawal
Enhanced participation from institutional investors is key, particularly from domestic institutions such as mutual funds, and domestic private and public insurers. While major insurers have been active in the REIT market recently, general insurance companies are yet to invest materially, and public sector insurance companies have not entered the market. Another strategic priority for us is to increase retail investor participation. REITs offer retail investors an accessible vehicle for capital deployment while enabling participation in India’s commercial real estate growth trajectory. With retail investors investing in REITs, expanding this segment would strengthen the overall investor ecosystem and broaden market participation.
Preeti Chheda
Investment limit constraints represent a key challenge. Several private insurers are approaching the current 3 per cent allocation threshold, prompting discussions with regulators regarding limit increases. The industry has recommended raising the insurance sector allocation limit to REITs/InvITs. The EPFO has started its investment journey in REITs/InvITs with government-backed InvITs. Given the absence of government-owned REITs, expanding EPFO participation requires building familiarity and confidence with private sector offerings.
Large public sector insurance companies have only recently started investments in REIT. With large AUMs a small allocation to these instruments shall also mean significant investment potential. These insurance companies are gradually gaining confidence in the product.
Rajesh Deo
Retail investor participation has already more than doubled, increasing from 6,000 investors in 2019, when Embassy REIT was listed, to over 290,000 currently (as of the first quarter of financial year 2026).
Broader recognition of REITs as an asset class is imminent. The sector has expanded beyond offices to encompass retail malls and hotels, with warehousing, data centres and hospitals under development. This diversification strengthens the REIT product offering across multiple real estate segments.
Pratichi Mishra
Initial regulations imposed stringent requirements for EPFO, pension funds and insurance funds, including sponsor credit rating thresholds of AA+ for pension fund eligibility, which many entities struggled to meet. These norms have been progressively relaxed. Taxation regime improvements have enhanced market appeal. Additionally, previous ambiguity regarding the treatment of distribution components has been resolved.
What have been some of the major investor concerns?
Abhishek Agrawal
In 2018-19, many non-institutional investors were keen to understand how REITs would generate mid-teen returns when traditional rental yields in India were only 2-5 per cent. Over the past year, however, investor understanding has deepened significantly. They now recognise the distinct risk profiles of equities, REIT’s, and direct real estate ownership. This clarity has reduced earlier comparisons that arose during periods of strong equity market performance, when equity returns of 20-30 per cent temporarily overshadowed the REIT proposition.
Preeti Chheda
Investor enquiries have remained consistent over time, focusing on growth trajectory, NOIs, distribution growth and the regulatory environment. For office REITs specifically, workplace dynamics constituted a primary concern during the pandemic. Work-from-home debates dominated discussions for an extended period, though this issue is now behind us as most are now back in office. Current enquiries centre on technology sector impacts, including artificial intelligence and employment trends, as investors seek assurance regarding office space demand over five- to 10-year periods. The perceived correlation between technology sector employment and office market fundamentals drives requests for long-term visibility and comfort on demand sustainability.
Rajesh Deo
Liquidity is a key challenge. Valuation methodology differences persist between REITs and traditional initial public offering (IPO) companies. Additionally, mandatory income distribution requirements limit retained capital for growth, constraining valuation multiples relative to companies that accrue earnings. To some extent, performance metrics have addressed investor concerns.
Pratichi Mishra
A key structural difference exists between REITs and InvITs: InvITs permit private placements, while REITs are restricted to public offerings. Regulatory reconsideration of private placement provisions for REITs could enhance market depth by enabling capital formation immediately preceding listing events.
What trends are likely to shape the future? What are some of the upcoming opportunities?
Abhishek Agrawal
India’s office market is inching toward the 1 billion square foot mark with about 520 million square foot qualifying as REIT-eligible. Existing REITs currently hold 170-175 million square foot indicating significant headroom for future listings and portfolio expansion.
Beyond offices, asset classes such as data centres and warehousing are well positioned to enter the REIT framework–either through diversification within existing REITs or as dedicated sector-focused vehicles.
A further growth driver is the redevelopment of older Grade A buildings. As these assets are upgraded and repositioned, they will add to the REIT-eligible inventory and support the next phase of sector expansion.
Preeti Chheda
Market participants view REITs as dynamic growth vehicles rather than static portfolios. Following five years of stabilisation, both REITs and investors now prioritise portfolio expansion and growth initiatives. This growth derives from two primary sources: organic development within existing portfolios and inorganic acquisitions. All REITs have pursued acquisitions, sourced either from sponsors or third-party transactions. Acquisition activity is expected to accelerate alongside organic growth, driven by investor demand for portfolio expansion. Moreover, significant acquisition potential remains, with over 50 per cent of REIT-eligible assets currently held outside listed vehicles, providing substantial runway for sector growth and consolidation.
Rajesh Deo
The trust targets doubling the portfolio within five years of being listed, with corresponding NOI doubling. Growth strategy comprises two components: organic growth and inorganic expansion through annual acquisitions of 1-1.5 million square foot. The combined approach targets total investor returns of over 15 per cent.
Pratichi Mishra
Global markets typically operate solely with REITs, while India has established separate classifications: REITs for real estate and InvITs for infrastructure assets. This distinction created some overlap, particularly regarding assets held exclusively for rental income generation. SEBI issued amendments earlier this year, establishing that any infrastructure asset generating rental income qualifies for REIT inclusion, regardless of traditional infrastructure categorisation. This regulatory clarification expands diversification opportunities beyond the current concentration in the office and retail sectors. While warehousing, data centres and other asset classes present substantial scale potential, development timelines remain extended given the significant capital commitments from institutional investors and private equity firms required to build investable portfolios.
What more can be done from a regulatory point of view?
Abhishek Agrawal
First, I would like to thank the regulators as they continue to advocate for REIT products in India. The recent equity reclassification of REITs is commendable.
Looking forward, the current financial model should be permitted to lend at the REIT level. Today’s financing model creates a maturity mismatch–REITs own long-term, perpetual assets but can typically access only two- to three-year debt. Allowing banks to lend at REIT level and provide longer–tenor loans would better align liabilities with asset duration and strengthen overall capital structure stability.
Preeti Chheda
Index inclusion would be my top ask.
Rajesh Deo
SEBI has demonstrated substantial commitment to the REIT sector over the past 18 months, treating it as a priority asset class. Significant rationalisation efforts have addressed existing frameworks, including index inclusion and quarterly reporting streamlining, the latter requirement having been successfully implemented.
Pratichi Mishra
Key priorities include enabling private placements for REITs, further standardising SEBI best practice expectations, permitting buyback programmes and introducing dividend reinvestment plans to recycle quarterly distributions as capital. The EPFO and pension fund participation remains critical for addressing liquidity constraints. Furthermore, long-term considerations include revisiting perpetual sponsor lock-in requirements to provide eventual exit flexibility.
