REITs vs. SM REITs: Choosing the Right Real Estate Investment
Real Estate Investment Trusts (REITs) have gained traction in India, with the introduction of SM REITs adding a new dimension to the investment landscape. Discover the differences and benefits of each to make an informed decision.
ReitsSm ReitsReal EstateInvestmentIndiaReal Estate NewsSep 03, 2025
Available for purchase via brokerages, REITs offer investors the chance to earn from the real estate sector without having to buy or manage any property themselves. REITs make real estate investing more accessible for smaller investors and allow them to diversify their portfolio with skyscrapers, shopping malls, or apartments.
How REITs Have Grown in India as an Investment Option Over the Years
The concept of REITs originally emerged in the USA in the 1960s but in India, it is a fairly new concept and was introduced by the Securities and Exchange Board of India (SEBI) only in 2014. Over the next three years, the market regulator refined the space by introducing norms ranging from the public listing of REITs to post-listing compliance.
This culminated in the first listing of a REIT on the Indian stock market in 2019. Currently, six REITs are listed in the country.
Emergence of SM REITs
Following the success of REITs, SEBI introduced a regulatory framework for small and medium REITs (SM REITs) in March 2024. These are characterized by smaller, pre-leased products with more accessible entry.
India already has 300 million square feet of SM REIT-ready office space, with another 50 million likely to come by 2026. SM REITs present a potential opportunity of more than $60 billion by 2026.
REITs vs. SM REITs: How Are They Different?
The biggest difference between the two trusts is that REITs invest in large-scale, institutional-quality properties, while SM REITs focus largely on small and medium-sized assets like standalone office buildings and warehouses of sizes less than 100,000 sq. ft.
The asset value under REIT needs to be at least Rs 500 crore. In SM REITs, this is mandated to be between Rs 50 crore and Rs 500 crore.
The minimum investment by a subscriber has been brought down to Rs 10,000 in the case of REITs. For SM REITs, this continues to be at Rs 10 lakh.
Generally, exchange-traded REITs are highly liquid and can be traded like shares. For SM REITs, most investors wait for the exit event to make substantial returns.
How Risky Are REITs and SM REITs?
Before putting in their money, an investor looks at risk as one of the most important factors under consideration. As REITs are bigger and more diversified, they carry relatively stable returns and lower risks like tenant concentration or oversupply. On the other hand, SM REITs may be better suited for investors with a higher risk tolerance, with their high entry point. Unlike REITs, they offer a more direct exposure to real estate in their portfolio.
Both have their pros and cons, and investing in them depends on the investment style of the retail subscriber. However, to mitigate potential risks, they must do due diligence and evaluate both REITs and SM REITs portfolios before investing money in them.
Other factors like the manager's record, property quality, and governance levels should also be considered.
What Should You Choose
You should pick REITs if:
- You are looking for low-ticket size investments with relatively stable returns.
You should pick SM REITs if:
- You want to invest Rs 10 lakh with slightly higher risk and with chances of relatively higher returns.
What Lies Ahead
REITs in India continue to hold significant growth potential, driven by a strong underlying demand for real estate in India. In the coming years, they are likely to take a more central role in the country's investment ecosystem. This, in return, is also likely to improve the quality of assets offered and attract global players.
Building on their success, SM REITs present an opportunity for investors to unlock price discovery and exit opportunities in smaller, high-occupancy assets. These could ultimately contribute to a more organized and efficient real estate ecosystem with a stronger asset profile.
For retail investors, while the market is at a comparatively nascent stage, both REITs and SM REITs offer an opportunity to be a part of the evolution of the real estate industry, which is poised to grow as India ascends the global stage.
Frequently Asked Questions
What are REITs?
REITs, or Real Estate Investment Trusts, are companies that own or finance income-generating real estate. They allow investors to earn from the real estate sector without directly buying or managing properties.
What is the difference between REITs and SM REITs?
REITs invest in large-scale, institutional-quality properties, while SM REITs focus on small and medium-sized assets like standalone office buildings and warehouses. REITs have a lower minimum investment and are more liquid, while SM REITs have a higher entry point and offer more direct exposure to real estate.
What are the risks associated with REITs and SM REITs?
REITs are generally more stable and carry lower risks due to diversification and larger asset sizes. SM REITs, with their focus on smaller assets, may carry higher risks but also offer the potential for higher returns.
How can I invest in REITs and SM REITs?
You can invest in REITs and SM REITs through brokerages. The minimum investment for REITs is Rs 10,000, while for SM REITs, it is Rs 10 lakh.
What should I consider before investing in REITs or SM REITs?
Before investing, consider factors such as the manager's record, property quality, governance levels, and your risk tolerance. REITs are suitable for low-ticket, stable returns, while SM REITs are better for higher-risk, higher-return investments.
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