REITs & InvITs

The entry price is small. SEBI’s investor education material puts the minimum subscription in a public issue at ₹10,000 to ₹15,000, with a trading lot of one unit, revised with effect from 30 July 2021. Before that it was ₹50,000 and 100 units.

The catch is the payout. It arrives split into interest, dividend, rental income and return of capital. Each is taxed differently. Your yield after tax is not the yield on the fact sheet.

What are the SEBI rules for REITs and InvITs?

Note the asymmetry in that last row. A privately placed InvIT is not held to the 80% rule. If someone offers you an unlisted InvIT, that is the first question to ask.

How is a REIT different from an InvIT?

The asset is the difference. A REIT owns buildings and earns rent from tenants. Most Indian REITs are office parks, so their fortunes track corporate leasing demand.

An InvIT owns infrastructure and earns a toll, a tariff or an availability payment. Many of those contracts are with a government counterparty and run for a fixed concession period. When the concession ends, the asset goes back. So an InvIT can be a wasting asset, while a building is not.

That matters for how you read the yield. A high InvIT payout may partly be your own capital coming back. It is not always the same thing as income.

How are REIT and InvIT distributions taxed?

SEBI’s own investor material splits the distribution into buckets, and the tax follows the bucket.

Two consequences follow. First, the dividend bucket is only tax-free some of the time, and the trust decides, not you. Read the distribution note that comes with each payout. It states the split.

Second, return of capital is where people go wrong at filing time. The treatment of that bucket has changed since 2023. Do not assume last year’s answer holds. Check the current position, or read our page on capital gains tax and take advice. The same care applies to gains when you sell the units, which follow the rules for listed securities rather than for property; see stock taxation.

How often must a REIT pay out?

Here two SEBI documents do not read the same way, and you should know it. The investor education deck approved on 30 September 2022 describes the 90% distribution as semi-annual. SEBI later tightened the rulebook, and the current reference is the Master Circular for REITs dated 11 July 2025.

We could not open the text of that master circular from a machine, so we are not quoting a frequency from memory. Check the trust’s own filings. Listed REITs and InvITs announce every distribution to the exchanges, and the record date and split appear there.

What is an SM REIT and should a retail investor buy one?

SM REITs are small and medium REITs, a newer category built for single buildings rather than portfolios. SEBI’s FAQ on the framework, issued 18 June 2024, sets the terms.

• The asset in a scheme must be worth at least ₹50 crore and less than ₹500 crore.
• A scheme needs at least 200 unit holders, excluding the investment manager and its related parties.
• At least 95% of the scheme’s assets must be in completed and revenue-generating property. Up to 5% may sit in unencumbered liquid assets.
• The minimum price of one unit is ₹10 lakh.

That last line settles the question. At ₹10 lakh a unit, this is not a retail product. It is closer to fractional ownership of one building, with the concentration risk that implies. A regular listed REIT holds many buildings and costs one unit to enter.

What can go wrong

The distribution is not a coupon. It depends on cash profits, and 90% of a smaller number is a smaller payout. A large tenant leaving an office park shows up in the next quarter.

The unit price moves like any listed security, and it moves with interest rates. When yields on government securities rise, an income asset has to compete, and its price usually falls. If you cannot hold through that, this is not the right instrument. Compare the current level against bond yields before you buy.

Choice is also thin. India has only a handful of listed REITs, most of them office-led, and a modest number of InvITs. You are not buying diversified Indian real estate. You are buying a few large landlords. You will need a demat account to hold them; see the demat account options.