The introduction of the Real Estate (Regulation and Development) Act in 2016 brought greater transparency to a sector long plagued by opaque transactions, although much remains to be done on this front

Buoyed by a slew of regulatory reforms, real estate investment trusts (REITs) have been gradually gaining popularity among investors in recent years. The market capitalisation of listed REITs has now surpassed ₹2 lakh crore following the listing of Bagmane Prime REIT. Embassy Office Parks REIT was the first to enter the Indian stock market, with a ₹4,570-crore IPO in March 2019.

Of late, the Union government, the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) have rolled out several measures to boost the popularity and wider acceptance of REITs. One of the most significant initiatives was SEBI’s reclassification of REITs as equity-related instruments from January 2026, followed by their inclusion in broader equity indices in July. These moves are expected to attract substantial passive inflows from mutual funds.

The RBI, meanwhile, has allowed commercial banks to lend directly to REITs and Infrastructure Investment Trusts (InvITs) under a regulated prudential framework, effective October 1. However, aggregate bank exposure to any single REIT or InvIT — including its holding companies and special purpose vehicles — cannot exceed 49 per cent of the trust’s asset value.

The recent passage of the Taxation and Other Laws (Amendment) Bill, 2026, is also expected to benefit REITs and InvITs. These instruments will now have greater tax flexibility and potentially lower cash tax outgo, as the amendments allow their special purpose vehicles to opt for the concessional tax regime while retaining the tax-exempt treatment of dividends distributed to unitholders.

Earlier, SEBI had made sweeping changes to bring REITs within the reach of a larger pool of investors by reducing the minimum application amount from ₹50,000 to ₹10,000-15,000 and the trading lot size from around 200 units to just one. It also permitted the launch of Small and Medium Real Estate Investment Trusts (SM REITs).

The introduction of the Real Estate (Regulation and Development) Act (RERA) in 2016 brought greater transparency to a sector long plagued by opaque transactions, although much remains to be done on this front.

SEBI is also considering allowing the issuance of depository receipts against REIT and InvIT units to widen investment options for overseas investors and attract foreign capital.

Despite these measures, REITs have yet to reach a wider investor base. Since the first REIT was listed in 2019, only six players have entered the Indian market, with Knowledge Realty and Embassy Office Parks REIT being the largest by market capitalisation.

However, Colliers, a global leader in commercial real estate, engineering and investment management, paints a positive picture for the sector.

According to Colliers, an additional 370 million sq ft of existing Grade A office stock could potentially be listed as future REITs, providing a significant growth runway for the office segment. “Looking ahead, REIT penetration levels in the office market can potentially reach 30 per cent by 2030, supported by influx of high-quality green-certified assets, strong occupier demand and sustained investor appetite,” it said.

It may be noted that it took nearly two decades for even advanced markets such as Singapore, the UK, Australia and Japan to popularise REITs.

With only about 10 years having passed since India introduced its REIT framework — and effectively just five years since the first listing, Embassy Office Parks REIT, in 2019 — the market is still at a nascent stage. Despite the recent policy push and growing investor interest, there is a long road ahead for REITs to become a mainstream investment avenue in India.

Published on August 14, 2026