REITs: A Smart Alternative for Owning Top Commercial Real Estate

Real estate has long been a favored asset for Indian investors, but owning commercial property comes with high entry barriers. Large upfront capital, long-tenure loans, tenant management, maintenance hassles, and illiquidity make direct ownership cumbersome.

Pratik Dantara, EPC member of the Indian REITs Association and chief investor relations officer and head of strategy at Nexus Select Trust, discussed the benefits of REITs (Real Estate Investment Trusts) at the Mint Money Festival 2026. Dantara drew an analogy with mutual funds, explaining, “You invest small amounts, own income-generating properties across the country, earn rental income, and buy or sell units like equity.”

A REIT invests in rent-yielding commercial assets such as office parks and malls. It is required to distribute 90% of its cash flows, typically on a quarterly basis. These structures are regulated by the Securities and Exchange Board of India (SEBI) and are professionally managed, removing operational hassles for investors. In India, the first REIT listed in 2019, and there are currently five listed REITs.

For investors, REITs promise to function as a hybrid between equity and fixed income. They offer relatively predictable cash flows through rental income, along with the potential for capital appreciation as property values rise and rents grow. Because they are listed, units can be bought and sold on exchanges, offering liquidity that physical real estate does not.

They can also serve as a diversification tool. Commercial real estate cycles do not always move in tandem with equity markets, making REITs a potential stabilizer within a broader portfolio.

On returns, Dantara said REITs have delivered a balanced mix of regular income and capital appreciation, with average returns of about 17% over the past five years. Risks in REIT investments are linked to real estate cycles. For instance, during events such as the COVID-19 pandemic, rental waivers can affect distributions. Interest rate cycles also influence borrowing costs and acquisition spreads.

For retail investors evaluating REITs, Dantara suggested focusing on distribution yields, asset valuations published every six months by independent valuers, and loan-to-value ratios. SEBI does not allow a REIT to borrow more than 49% of the value of its total assets.

“Most Indian REITs currently borrow only about 28-30%, which indicates that they have relatively moderate debt levels and lower financial risk,” Dantara noted. The idea is that investors who work in premium office parks or shop in large malls can now own a share of those same properties through REITs, without committing massive capital.

REITs offer a compelling alternative for investors looking to diversify their portfolios and gain exposure to high-quality commercial real estate without the usual barriers to entry. By understanding the returns, risks, and key metrics to track, investors can make informed decisions about including REITs in their investment strategies.