A REIT (Real Estate Investment Trust) is a listed trust that owns income-producing real estate (office parks, malls, warehouses) and passes the rent it collects to its unit holders. An InvIT (Infrastructure Investment Trust) works the same way for infrastructure assets such as toll roads, power transmission lines and gas pipelines. Both trade on NSE and BSE, so you can buy a slice of large properties or highways the way you buy a share.
How does a REIT actually work?
Think of what it would take for Lakshmi to earn rental income from a premium office tower: crores to buy it, tenants to manage, upkeep to fund. A REIT does all of that at scale. It pools money from thousands of investors, owns a portfolio of completed, rent-earning buildings, and distributes the rental cash flow to everyone who holds its units.
Lakshmi can buy REIT units through her trading account during market hours, at the prevailing market price. Say 200 units at ₹350 each, a ₹70,000 exposure to a portfolio of office parks she could never buy alone. Periodically, the REIT credits distributions to her bank account, drawn from the rents its buildings earn.
REITs and InvITs are regulated by the market regulator, the Securities and Exchange Board of India (SEBI). Two rules shape their character: they must invest mostly in completed, income-generating assets rather than under-construction projects, and they must distribute the large majority of their distributable cash flows to unit holders on a regular schedule. That is why they are usually discussed as income-oriented instruments.
And what is an InvIT?
Same structure, different assets. An InvIT owns operating infrastructure, a portfolio of toll roads collecting daily tolls, or transmission lines earning contracted fees, and passes those cash flows to unit holders. Infrastructure revenues often run on long-term contracts or concessions, which can make the income stream steady, though it carries its own risks: traffic on a toll road can disappoint, contracts can be renegotiated, and concessions eventually end.
| REIT | InvIT | |
|---|---|---|
| Owns | Income-producing real estate | Operating infrastructure assets |
| Income source | Rent from tenants | Tolls, transmission fees, contracted revenues |
| You hold | Units (not shares) | Units (not shares) |
| Traded on | NSE / BSE, via your trading account | NSE / BSE, via your trading account |
How are they different from buying a stock?
You hold units of a trust, not shares of a company, and the return has two parts: regular distributions (the rent or toll income passed through) and the change in unit price on the exchange. Distributions can also be a mix of dividend, interest and return of capital, each taxed differently, worth checking with a tax reference before you file.
The unit price moves with markets. Interest rates matter in particular: when rates rise, the fixed-ish income from a REIT or InvIT looks less attractive by comparison, and unit prices often soften; when rates fall, the reverse. Occupancy levels, tenant quality and traffic growth drive the underlying cash flows.
How do I invest in one?
Two routes. When a new REIT or InvIT raises money from the public, you can apply in its public issue. The process is walked through in how do I invest in InvIT and REIT public issues? Once listed, units trade like any listed instrument, and you buy or sell at market prices during trading hours. Units sit in the same demat account as your shares.
Things to keep in mind
- REITs and InvITs are income-plus-market-price instruments: distributions are relatively regular, but the unit price can fall like any listed security.
- Distributions depend on real cash flows. Vacant offices or weak toll collections mean smaller payouts; nothing is guaranteed.
- Unit prices are sensitive to interest-rate moves, often more than ordinary shares are.
- The tax treatment of distributions differs from share dividends; confirm the current rules before investing.
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