REITs and InvITs: A Gateway to Profitable Real Estate and Infrastructure Investments

Equity REITs focus on owning and managing commercial projects, mREITs provide financing for such projects

Investment instruments known as Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) offer investors an accessible route to participate in the commercial real estate and infrastructure sectors. These instruments, listed on stock exchanges, function like mutual funds, enabling public trading and regular dividend distributions if they perform well. REITs and InvITs, while similar in providing investment opportunities, cater to different sectors. REITs are primarily involved in managing and renting out income-producing commercial properties. They are classified into three categories: equity REITs, mortgage REITs (mREITs), and hybrid REITs. Equity REITs focus on owning and managing commercial projects, mREITs provide financing for such projects, and hybrid REITs generate income from both rent and mortgage interest.

On the other hand, InvITs introduced in India by SEBI in 2014, target infrastructure projects like power plants, tunnels, bridges, and roads. They are divided into two categories based on the project stages: completed projects, often funded through initial public offerings (IPOs), and under-construction projects, funded via private companies. For retail investors, REITs and InvITs represent a hassle-free way to invest in real estate and infrastructure without incurring the high costs typically associated with direct ownership. These investments are akin to holding real estate assets in a demat account, providing both asset appreciation and regular income. Moreover, like debt funds, REITs must distribute a significant portion of their profits to investors, making them a reliable source of consistent income.

As a result, REITs and InvITs have become increasingly attractive to retail investors, offering a blend of growth potential and income stability.