Invest ₹10 Lakh in Real Estate Through SM REITs: A Hassle-Free Option
Discover how Small and Medium Real Estate Investment Trusts (SM REITs) offer a hassle-free way to invest in real estate without the need to manage tenants or physical properties.
Real EstateReitsSm ReitsInvestmentRental IncomeReal EstateOct 05, 2025
Small and medium REITs work on the same principle as traditional REITs, pooling investors’ money to acquire and manage income-generating real estate. The key difference lies in their size and reach. Think of an SM REIT as a pool of money collected from many investors to buy and manage income-generating real estate such as offices, warehouses, or shopping centres.
Instead of you buying a property yourself, the SM REIT owns and manages the properties, and you just invest a small amount to get a share of the rental income and property value growth. Traditional REITs handle very large properties worth over ₹500 crore. SM REITs, on the other hand, deal with smaller portfolios between ₹50 to ₹500 crore. This makes them more affordable for regular investors.
“Regulated by SEBI, they follow the same compliance and disclosure norms and are required to distribute most of their earnings, ensuring a transparent and regular income stream for investors,” says Pranay Kumar, Executive Director, REPL, an urban development and infrastructure consultancy. The minimum investment for SM REITs is ₹10 lakh. Some common formats that are part of their portfolio include office buildings, stores, warehouses, logistical centers, and hospitals.
For investors, these assets offer a variety of rental income and the opportunity to benefit from capital appreciation. SM REITs invest in small to mid-sized buildings suitable for small and medium-sized businesses. “In return terms, SM REITs offer stability and moderate yields, typically in the 9–12% range, suitable for those seeking income and protection rather than high-growth returns from development-led appreciation,” says Manoj Dhanotiya, founder and CEO, Micro Mitti, a real estate co-investment company.
While SM REITs offer potential benefits, they also come with certain risks. Fluctuations in property values can impact the REIT's share price. Additionally, SM REITs are a relatively new asset class, and their long-term performance remains to be seen. “Risk-averse investors or those requiring a high degree of certainty in their investments may prefer other asset classes,” says Shobhit Agarwal, MD and CEO, ANAROCK Capital, a real estate consultancy.
Before investing, retail investors should conduct thorough due diligence. This includes analysing financial statements, understanding the investment strategy, assessing the quality of the property portfolio, and evaluating the overall health of the commercial and residential real estate market. Additionally, investors should carefully analyse offer documents, including details of properties, projected yields, and Net Asset Value (NAV) disclosures.
Let’s say you have ₹10 lakh to invest, the minimum amount required for REITs. Should you invest? Not necessarily. REITs are designed for investors who want real estate exposure in their portfolio without owning physical property. They are not an alternative to mutual funds and may not be the right starting point for new investors. For risk-averse investors, real estate should ideally make up only 5–10% of the overall portfolio, and REITs can be a suitable way to achieve that exposure without directly purchasing property.
Investing in a REIT is just a way of investing in property. If you were investing in a property, you would own one physical asset. Your upfront investment would be at least ₹25 lakh even if you were buying a property in a small city. You would have to worry about tenants, maintenance, and paperwork. In case of a REIT, you do not have to worry about anything, but get a regular income. You can start with the minimum amount and sell your units when you need. Investing in property requires a large upfront payment, involves ongoing costs, and may require months to sell.
It is important to understand the difference between REITs and mutual funds. “Mutual funds provide T+1 or T+2 redemption with minimal impact cost, ensuring quick access to money. SM REITs have limited liquidity where finding a buyer can take weeks or months, and urgent sales often come at a discount, reducing realised returns,” says Prashant Mishra, founder and CEO, Agnam Advisors, a wealth management firm. What this essentially means is that you can redeem your mutual funds in one or two days unlike REITs which will take a longer time to redeem.
REIT income is taxed by component interest at slab rate, dividends often exempt, and amortisation adjusted against capital gains. “Equity mutual funds now attract 12.5 percent long-term and 20 percent short-term capital-gains tax, while new debt funds are taxed at slab rates. In my view, mutual funds usually offer higher post-tax efficiency unless an investor prioritises steady rental income,” said Paramdeep Singh, founder, Long Tail Ventures, an investment firm.
SM REITs are thus suitable for mature retail investors seeking a diversified portfolio with exposure to both commercial and residential real estate without directly buying property.
Frequently Asked Questions
What is an SM REIT?
An SM REIT (Small and Medium Real Estate Investment Trust) is a financial vehicle that pools investors' money to buy and manage income-generating real estate properties. It is designed for smaller portfolios and is more accessible to regular investors.
What are the minimum investment requirements for SM REITs?
The minimum investment for SM REITs is ₹10 lakh.
What are the potential returns from SM REITs?
SM REITs typically offer stability and moderate yields, ranging from 9% to 12%, suitable for investors seeking regular income and protection.
What are the risks associated with SM REITs?
Risks include fluctuations in property values, which can impact the REIT's share price, and the fact that SM REITs are a relatively new asset class with limited long-term performance data.
How do SM REITs compare to mutual funds in terms of liquidity?
Mutual funds generally offer T+1 or T+2 redemption with minimal impact cost, ensuring quick access to money. SM REITs, however, have limited liquidity, and finding a buyer can take weeks or months, often at a discount.
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