Understanding REITs

I read the story on multi-asset allocation funds in the previous issue. While I’m familiar with various asset classes, I wasn’t very aware of REITs, which you mentioned. Could you please explain what they are? - Kunal Dhamale 

Editor Responds : Real Estate Investment Trusts (REITs) are investment vehicles that pool money from investors to invest in income-generating real estate assets, such as commercial office spaces, shopping malls, warehouses, and hotels. Think of REITs as mutual funds for real estate—investors can earn returns through both capital appreciation and regular dividend income, without having to directly own or manage property. REITs are listed and traded on stock exchanges, making them highly liquid compared to physical real estate. In India, REITs are regulated by SEBI and must distribute at least 90 per cent of their net distributable cash flows to investors, offering a steady income stream. As part of a multi-asset allocation strategy, REITs provide portfolio diversification, help hedge inflation, and reduce overall risk by offering exposure to the real estate sector. Their inclusion in multi-asset funds reflects their growing relevance and the maturing Indian real estate investment landscape.