A Real Estate Investment Trust (REIT) lets you own a small slice of large rent-earning property, mostly office parks and shopping malls, by buying units on the stock exchange. The REIT collects rent and must pass most of its cash to unitholders, usually every quarter. This guide explains how REITs work, the rules they follow, how their payouts are taxed and the risks. For current yields, occupancy and size of each listed REIT, see our comparison of all five Indian REITs.
What a REIT is
A REIT is a trust registered with SEBI. It owns completed, income-producing real estate, usually through special purpose vehicles (SPVs), which are companies that each hold one or more properties. Four parties run it:
- a sponsor, the developer or investor that set it up;
- a manager, who runs the properties and the trust;
- a trustee, who protects unitholders' interests;
- independent valuers, who value the properties regularly.
Rent flows from tenants to the SPVs. The SPVs pass cash up to the REIT as interest on loans the REIT has given them, as dividends, and as repayment of those loans. The REIT then distributes it to you. That route is why your payout arrives in several pieces, each taxed differently (see below).
India has five listed REITs as of September 2026: Knowledge Realty Trust (listed August 2025, now the largest by market value), Embassy Office Parks (India's first, April 2019), Mindspace Business Parks, Brookfield India Real Estate Trust and Nexus Select Trust (the only one owning shopping malls). Four are office REITs. Together they were worth roughly ₹1.78 lakh crore at late-September 2026 prices.
The SEBI rules that matter to investors
REITs are governed by the SEBI (Real Estate Investment Trusts) Regulations, 2014. The rules most relevant to you:
- Payout: at least 90% of net distributable cash flow must be distributed to unitholders, at least once every six months. All five listed REITs currently pay quarterly.
- Completed assets: at least 80% of the value of a REIT's assets must be in completed, rent- or income-generating properties. This limits exposure to construction risk.
- Valuation and disclosure: properties are valued by independent valuers, and REITs publish quarterly results with occupancy, leasing and the tax split of each distribution.
- Trading lot: since July 2021, listed REIT units trade in lots of one unit. The minimum application in a public issue is between ₹10,000 and ₹15,000.
From 1 January 2026, SEBI treats REIT units as equity-related instruments for mutual fund and SIF portfolios. That is a rule about how funds classify their holdings; it does not change how REIT units you hold yourself are taxed.
Where the return comes from
Your return from a REIT has two parts:
- Distributions paid each quarter. At late-September 2026 prices, the five listed REITs' latest quarterly payouts annualised to a yield of about 5.3% to 6.6% before tax. That is a run-rate, not a promise; payouts move with occupancy, rents and interest costs.
- Change in unit price, driven by rental growth, new acquisitions, interest rates and market sentiment. It can be negative.
Because the cash comes in quarterly instalments and the price moves daily, a simple "price then vs price now" comparison understates or overstates what you actually earned. To measure your own return accurately, enter every purchase, distribution and sale with its date into an XIRR calculator. We have not quoted historical total returns here because they vary widely by REIT and by start date.
How REIT payouts are taxed
Each distribution is split into components, and each is taxed differently in your hands:
| Component | How it is taxed |
|---|---|
| Interest | Added to your income and taxed at your slab rate. |
| Dividend | Tax-free in your hands if the SPV paying it has not opted for the concessional corporate tax regime. Taxable at your slab rate if it has. |
| Repayment of debt (also called amortisation of SPV debt) | Not taxed when you receive it; it reduces the cost of your units for capital gains. Since the Finance Act 2023, once your total repayments exceed the issue price of the units, the excess is taxed as income from other sources. |
| Rental income | Arises only where the REIT holds a property directly rather than through an SPV. Uncommon. |
The mix varies enormously between REITs, and from quarter to quarter. Two examples from the June 2026 quarter show the range:
- Embassy's payout was about 81% repayment of debt, 13% dividend and 6% interest. Very little was taxable in the year it was received.
- Nexus Select's payout was about 43% interest, 35% dividend and 22% repayment of debt. Much more was taxable at slab rates.
So the claim that "REIT income is taxed like an FD" is wrong for some REITs and close to right for others. Every REIT publishes the split with each distribution. Check it before estimating your tax; the REIT comparison lists the latest mixes.
Tax when you sell units
- Held 12 months or less: short-term gain taxed at 20%.
- Held more than 12 months: long-term gain taxed at 12.5% above ₹1.25 lakh a year. The ₹1.25 lakh exemption is shared with your gains on listed shares and equity mutual funds.
These rates have applied to listed REIT units since 23 July 2024. Older articles that say you need 36 months for long-term treatment are out of date. The Income-tax Act, 2025, in force from 1 April 2026, renumbered the sections but did not change these rates. Our 2026 capital gains guide for funds explains how the ₹1.25 lakh exemption is shared.
How to buy REIT units
- Open a demat and trading account with any SEBI-registered broker, if you do not have one.
- Search for the REIT by its exchange symbol on NSE or BSE. Units trade during market hours like shares.
- Buy as few as one unit. Unit prices ranged from about ₹113 to ₹508 in late September 2026, depending on the REIT.
- Receive distributions straight into the bank account linked to your demat account, with a statement showing the component split.
- Keep the statements. You need the repayment-of-debt amounts to work out your cost when you sell.
You can also apply in a REIT's public issue, where the minimum application is ₹10,000 to ₹15,000. Some mutual funds hold REITs, which is another indirect route.
NRIs may also invest, subject to FEMA rules; check with your broker which account type it requires.
Risks to understand
- Interest rates. When bond yields rise, REIT yields look less attractive and prices tend to fall. Higher rates also raise the REIT's own borrowing costs.
- Concentration. Four of the five listed REITs own offices, mostly in a handful of large cities and leased largely to technology and services firms. Weak office demand would hit them together.
- Tenant risk. Losing a large tenant, or leases expiring in a weak market, reduces occupancy and payouts. Check each REIT's tenant mix and lease-expiry schedule in its quarterly presentation.
- Payouts are not fixed. Distributions can fall. A yield is not a coupon.
- Tax mix can change. As SPV loans are repaid, the share of debt repayment in payouts may fall and the taxable share may rise.
- Few choices. With five listed REITs, diversification within the asset class is limited.
- Sponsor and governance. Sponsors often keep large stakes and may sell units over time, which can weigh on prices.
REIT vs owning a flat to rent out
| Listed REIT | Rental flat | |
|---|---|---|
| Minimum investment | One unit (a few hundred rupees) | Lakhs to crores, often with a loan |
| Liquidity | Sell on the exchange on any trading day | Weeks to months, with brokerage and stamp duty |
| Management | Professional; no tenant dealings | Yours: tenants, repairs, vacancies |
| Diversification | Many buildings and tenants | One property, one tenant |
| Control | None | Full |
If you are weighing property against financial assets more broadly, our buy vs rent analysis covers the home-ownership side.
Small and Medium REITs (SM REITs)
In March 2024 SEBI amended the REIT Regulations to create Small and Medium REITs, for smaller properties that would not justify a full REIT. The key differences:
| Listed REIT | SM REIT | |
|---|---|---|
| Asset size | At least ₹500 crore | ₹50 crore to ₹500 crore per scheme |
| Minimum investment | One unit on the exchange | ₹10 lakh per unit at issue |
| Completed, income-generating assets | At least 80% | At least 95% |
| Payout to unitholders | At least 90% of net distributable cash flow | 100% of the scheme's net distributable income |
| Structure | One trust | One trust running separate schemes, each holding its own assets |
SM REIT units must be listed. But the ₹10 lakh ticket and thin trading make them a different product from the five large REITs: closer to a concentrated bet on one or two buildings than a diversified holding.
REITs vs InvITs
Infrastructure Investment Trusts (InvITs) use the same trust structure but own infrastructure such as roads, power transmission lines and pipelines instead of offices and malls. Their payouts are also split into interest, dividend and repayment components. Many InvIT assets, such as toll roads, have a finite life, which affects how you should read their yields.
Is a REIT right for you?
That depends on your goals, tax slab and existing exposure to property. A REIT can make sense for someone who wants regular cash flow and real-estate exposure without buying a property. It makes less sense for someone who already owns significant property or needs capital growth above all. Work out what you need from your portfolio first, then check whether a REIT's yield and tax mix fit. Measure what you earn over time with the XIRR calculator, which handles quarterly distributions correctly.
This guide explains how REITs work and how they are taxed. It is not a recommendation to buy any REIT. Check each REIT's latest distribution statement and offer documents, and consult a tax adviser for large holdings.
