For generations, land and gold have been among the most trusted investment choices for Malayali investors. Those with surplus funds have traditionally preferred buying property, while some have turned to the stock market for wealth creation.
However, direct property investment requires large capital and comes with challenges such as low liquidity, maintenance responsibilities and legal complications. For investors looking to participate in India's growing real estate and infrastructure sectors without purchasing physical assets, modern investment instruments such as Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) provide an alternative route.
These instruments allow investors to earn income from commercial properties, highways, power transmission networks and other infrastructure assets with a relatively smaller investment.
Although real estate is considered a stable asset class, investing directly in land or buildings has several limitations.
The biggest challenge is liquidity. Unlike shares, property cannot be converted into cash quickly. Finding the right buyer and completing legal procedures can take months or even years.
Rental income is another concern. Residential properties usually provide rental yields of around 2–3%, which may be lower than returns available from other fixed-income options.
Property ownership also involves several responsibilities, including documentation issues, boundary disputes, maintenance costs and regular follow-up. These challenges can be particularly difficult for non-resident Indians and elderly investors.
REITs and InvITs work on a model similar to mutual funds. Money collected from investors is pooled and invested in income-generating real estate and infrastructure assets.
Investors do not have to purchase an entire building or infrastructure project. Instead, they can buy units of these trusts through stock exchanges and earn a share of the income generated by these assets.
Real Estate Investment Trusts invest mainly in commercial properties such as office buildings, shopping malls and warehouses.
The trust owns these properties and leases them to companies and businesses. The rental income generated from these assets is distributed among investors.
For example, a REIT may own large office campuses occupied by technology companies and multinational corporations, creating a steady rental income stream.
Infrastructure Investment Trusts focus on assets such as highways, power transmission networks, telecom towers and other infrastructure projects.
The income generated through toll collections, user charges and project revenues is distributed among investors.
Through InvITs, small investors can participate in large infrastructure projects that would otherwise require significant capital.
REITs are mainly linked to commercial real estate assets, while InvITs are connected to infrastructure projects. In REITs, rental income from office spaces, malls and warehouses is the primary source of returns. In InvITs, income comes from highways, power networks and other infrastructure assets.
Both instruments are listed on stock exchanges, allowing investors to buy and sell units through demat accounts. Compared with direct property ownership, they offer easier entry and better liquidity.
One of the major attractions of these instruments is regular income. Under SEBI regulations, REITs and InvITs are required to distribute a significant portion of their distributable cash flows to investors.
Another advantage is liquidity. Unlike physical property, where selling can take months, REIT and InvIT units can be traded through stock exchanges.
These instruments also provide diversification. Instead of investing a large amount in a single property, investors can gain exposure to multiple assets managed by professional teams.
Investing in REITs and InvITs is similar to buying shares. An investor needs a demat and trading account. Listed trusts can be searched through broker platforms, and units can be purchased according to investment requirements.
Investors who understand market movements can directly buy units through exchanges. Those who prefer professional management can explore mutual funds or specialised funds that invest in REITs and InvITs.
Embassy Office Parks REIT, India's first listed REIT launched in 2019, focuses on Grade-A office spaces and technology campuses across cities such as Bengaluru, Mumbai, Pune, Chennai and the National Capital Region.
Mindspace Business Parks REIT owns commercial office assets in major cities including Mumbai, Hyderabad, Pune and Chennai.
Brookfield India Real Estate Trust invests in large commercial office campuses across locations such as Mumbai, Gurugram, Noida and Kolkata.
Nexus Select Trust is India's first retail-focused REIT, with shopping malls as its primary assets.
Knowledge Realty Trust focuses on Grade-A office properties, particularly in the IT and IT-enabled services sector.
PowerGrid Infrastructure Investment Trust focuses on power transmission assets.
National Highways InvIT generates income through highway projects and toll collections.
India Grid Trust invests in power transmission and infrastructure assets.
IRB InvIT Fund focuses mainly on road infrastructure projects.
Like every investment product, REITs and InvITs also carry risks. Investors should examine the past distribution history, quality of assets, occupancy levels, credit ratings and management track record before investing.
Since REITs and InvITs are listed on stock exchanges, their unit prices can fluctuate depending on market conditions.
In REITs, lower occupancy levels in commercial properties can affect rental income. Economic slowdown or changes in business demand may impact office space requirements.
In InvITs, lower traffic on highways or reduced revenue from infrastructure projects can affect returns.
However, long-term contracts, reputed tenants and stable infrastructure assets can help reduce these risks.
Income from REITs and InvITs can come through different sources, including dividends, interest income and capital gains.
The tax treatment depends on the nature of income and prevailing income tax rules.
Interest income received from these investments is generally taxable according to the investor's income tax slab.
If units are sold at a profit, capital gains tax may apply depending on the holding period and applicable regulations.
Tax rules are subject to change, and investors should verify the latest provisions before investing.
Real estate remains an important investment avenue, but changing financial markets have created new ways to participate in this sector.
Instead of locking a large amount of money into a single plot or apartment, investors can consider diversified options such as REITs and InvITs based on their financial goals and risk appetite.
For investors who want exposure to India's real estate and infrastructure growth without the responsibilities of owning physical assets, these instruments provide a modern investment opportunity.
Disclaimer: The information provided in this article is for educational purposes only and should not be considered investment advice. Investments in stocks, mutual funds, REITs and InvITs are subject to market risks. Investors should carefully read related documents and consult SEBI-registered investment advisers before making investment decisions.
(The author is a deputy secretary in the Department of Finance, Government of Kerala.)
