Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) are SEBI-regulated investment vehicles that allow retail investors to participate in income-generating real estate and infrastructure assets. They offer regular income distributions and are listed on stock exchanges.
Structure Overview
Both REITs and InvITs operate through a trust structure:
- Trust: The REIT/InvIT entity registered with SEBI
- Manager: Professional entity managing trust assets
- Trustee: SEBI-registered trustee (bank or trust company)
- Special Purpose Vehicles (SPVs): Companies holding the underlying assets (properties/infrastructure)
- Unit Holders: Investors who hold trust units traded on exchanges
REIT vs InvIT
| Feature | REIT | InvIT |
|---|---|---|
| Assets | Commercial real estate (offices, malls, warehouses) | Infrastructure (roads, power plants, pipelines, telecom) |
| Minimum distribution | 90% of net distributable cash flow | 90% of net distributable cash flow |
| Asset size | Rs.500 crore minimum | Rs.500 crore minimum |
| Leverage | Up to 49% of asset value | Up to 70% of assets in debt |
| Investor base | Public (retail investors) | Public (broader base after 2021 SEBI amendments) |
Tax Treatment of REIT/InvIT Distributions
REIT/InvIT distributions to unit holders can consist of multiple components, each taxed differently:
| Distribution Component | Tax in Hands of Unit Holder |
|---|---|
| Dividend from SPV | Taxable as dividend at applicable slab rate (TDS at 10%) |
| Interest income from SPV | Taxable as income from other sources at slab rate (TDS at 10%) |
| Capital gains from SPV | As per capital gains provisions; LTCG/STCG rules |
| Repayment of SPV debt | Exempt (return of capital) |
Section 10(23FCA) and Related Exemptions
- Section 10(23FCA): Income of business trusts (REIT/InvIT) in the form of rent from properties held directly is exempt
- Section 115UA: Special provisions for taxation of income of REIT/InvIT — trust income passed through to unit holders with original tax character
- Exempt SPV dividend: If SPV opts for Section 115BAA (22% corporate tax), dividends to REIT are exempt, and when distributed to unit holders, taxable as dividend
Capital Gains on Sale of REIT/InvIT Units
| Holding Period | Gain Classification | Tax Rate |
|---|---|---|
| Up to 12 months | STCG | 20% (equity STCG rate) |
| More than 12 months | LTCG | 12.5% above Rs.1.25 lakh (ITA 2025 rates) |
STT (Securities Transaction Tax) applies on listed REIT/InvIT unit transactions on exchanges.
Key Indian REITs
- Embassy Office Parks REIT (BSE/NSE) — largest office REIT
- Mindspace Business Parks REIT
- Brookfield India Real Estate Trust
- Nexus Select Trust (retail malls)
Key Indian InvITs
- India Grid Trust (IndiGrid) — power transmission
- IRB InvIT Fund — toll roads
- PowerGrid Infrastructure Investment Trust
- National Highways Infra Trust (NHAI InvIT)
Investor Benefit: REITs and InvITs provide retail investors access to institutional-quality assets previously only available to large investors. They offer regular quarterly distributions (like bond coupons), inflation protection, and exchange liquidity. Minimum investment in REITs was reduced to 1 unit by SEBI in 2021, making them more accessible.