Budget 2026 Proposes Dedicated REITs for CPSE Asset Monetisation: What It Means for Investors

Budget 2026 proposes accelerating the ‘recycling’ of real estate assets owned by central public sector enterprises (CPSEs) by creating dedicated Real Estate Investment Trusts (REITs). In her Budget speech, Finance Minister Nirmala Sitharaman highlighted the success of REITs as an asset monetisation tool and proposed this initiative to further leverage CPSE-owned properties.

Real estate experts are optimistic about the proposal to pool government real estate and land via REITs. This could unlock large prime-city holdings, providing retail investors with access to high-quality, income-generating real assets. The benefits include regular yields, potential long-term appreciation, and liquidity through listed markets.

What are REITs?

REITs are investment vehicles that allow individuals to invest in large, income-generating commercial properties, such as office buildings, malls, or warehouses, without directly owning the properties. Investors earn a share of rental income and can benefit from capital appreciation, while enjoying liquidity similar to that of stocks, as REITs are listed on exchanges.

At present, there are five listed REITs in India: Brookfield India Real Estate Trust, Embassy Office Parks REIT, Mindspace Business Parks REIT, Nexus Select Trust, and Knowledge Realty Trust.

By creating dedicated REITs for CPSE properties, the government aims to monetise high-value assets efficiently. CPSE-owned assets are well-located, professionally managed, and have stable tenant profiles, making them attractive for long-term income-seeking investors.

CPSEs hold substantial land assets identified for monetisation under the government’s National Asset Monetisation Pipeline. REIT structures typically attract large funds and institutional investors, which could help the government accelerate its asset monetisation plans.

For retail investors, such REITs offer several advantages: they can diversify an investment portfolio beyond equities and bonds, generate relatively predictable rental income, and potentially provide tax-efficient returns. Government backing for these projects may also lower perceived risk compared to private commercial developments.

What the Budget 2026 Proposal Means

The decision to include CPSE assets into the REIT structure is a significant shift and is likely to have a multi-layered impact on the asset class. Anshuman Magazine, chairman and CEO - India, South-East Asia, Middle East & Africa, CBRE, noted, “This move is likely to deepen the market, as these entities have large assets, and increase the participation of institutional investors, including mutual funds.”

Since CPSEs are often mandated to provide steady returns, their REITs are expected to focus on high-yield, stable income distributions. Tanuj Shori, founder and CEO, Square Yards, explained, “For retail investors, this expands access to high-quality, income-generating real assets that were earlier largely available only to institutions. They offer the dual benefit of regular yield visibility and participation in long-term asset appreciation, while providing liquidity through listed markets.”

However, investors should remember that REIT returns are influenced by factors such as occupancy rates, interest rates, and property valuations. While REITs offer a path to participate in India’s growing commercial real estate sector, they should be seen as a medium- to long-term addition to a diversified portfolio rather than a get-rich-quick instrument.

Chintan Patel, partner, Deal Advisory and Head of Real Estate & Hospitality and Transport & Logistics, KPMG in India, added, “There are large tracts of land and real estate in prime locations across metropolitan cities that could be unlocked through this route.”

The Indian REITs Association welcomed the announcement, stating, “It reflects a clear move from passive ownership to efficient, market-linked asset management, while unlocking long-term value from mature public assets and recycling capital into fresh infrastructure development. Dedicated CPSE REITs can accelerate capital recycling, improve balance-sheet efficiency for public enterprises, and expand access to high-quality, income-generating assets for a wider investor base.”

Ramesh Nair, managing director and CEO, Mindspace Business Parks REIT, emphasized, “Dedicated REIT structures for CPSE asset monetisation strengthen the pipeline for long-term institutional capital across real estate and infrastructure.”

In summary, the proposal to create dedicated REITs for CPSE assets is a strategic move to unlock value from prime real estate holdings and provide retail investors with a new avenue for income-generating investments. While the potential benefits are significant, investors should approach these investments with a long-term perspective and a clear understanding of the underlying factors that influence REIT performance.