What are InvITs and REITs?
Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs) are SEBI-regulated pooled investment vehicles that own and operate income-generating infrastructure or real estate assets. InvITs invest in assets like highways, power transmission lines, telecom towers, and gas pipelines. REITs invest in commercial real estate — primarily Grade A office spaces, retail malls, and warehousing. Both are listed on stock exchanges, allowing retail investors to gain exposure to large-scale infrastructure and real estate projects that were previously accessible only to institutional investors.
Income Distribution and Yields
InvITs and REITs are required to distribute at least 90 percent of their net distributable cash flow to unitholders, making them attractive for regular income. Distributions typically happen quarterly and can include interest, dividends, and return of capital — each component has different tax treatment. As of recent years, listed InvITs in India have offered yields in the range of seven to nine percent, while REITs have delivered six to eight percent, supplemented by potential unit price appreciation. The yields are generally higher than bank fixed deposits and comparable to high-quality corporate bonds, with the added benefit of inflation linkage through periodic rental escalations.
How to Invest and Key Risks
Retail investors can buy InvIT and REIT units on the stock exchange through their regular trading and Demat accounts, just like stocks. The minimum lot size has been reduced to one unit for most listed trusts, making them accessible at affordable price points. Key risks include interest rate sensitivity (rising rates can reduce unit prices), tenant concentration risk, asset quality, and leverage levels of the trust. Before investing, review the trust asset portfolio, occupancy rates, debt maturity profile, and the sponsor track record. InvITs and REITs work best as the stable income-generating allocation within a diversified portfolio.