REITs and InvITs Explained: Features, Benefits and Risks
Why in the news
Sebi issued a public warning on Strata, a commercial real estate investment platform, after it voluntarily gave up its SM REIT licence. Sebi had earlier framed rules for Small and Medium REITs to widen small investors’ access to property.
REITs versus InvITs
| Point | REIT | InvIT |
|---|---|---|
| Full form | Real Estate Investment Trust | Infrastructure Investment Trust |
| Regulator | Sebi | Sebi |
| Assets | Offices, malls, hospitals, hotels | Roads, highways, power transmission, airports, renewables |
| Income | Rent from properties | User charges and toll revenue |
| Risk level | Lower | Moderate to high |
| Structure and returns | Trust-based; dividends plus capital gains | Same as REIT |
Key facts
- REITs let investors hold real estate exposure like stocks, without owning property.
- InvITs work like mutual funds, letting developers monetise operational assets and investors pool money.
- Units are listed on NSE and BSE, so they are liquid.
- Investors need a Demat and trading account; units can be bought on exchanges or in an IPO.
- Payouts: at least 90% of net distributable cash flows as dividend or interest.
- Examples: Embassy Office Parks, Mindspace Business Parks, Brookfield India (REITs); IRB, India Grid Trust, PowerGrid (InvITs).
Benefits
- REITs: lower-risk entry, liquidity, diversification, stable rental income.
- InvITs: low capital need, regular income, easier fundraising, asset monetisation that cuts leverage.
Concerns
- REITs: price swings with real estate trends; downturn hits returns.
- InvITs: project delays, policy changes, funding shortages and costlier borrowing.
Sebi’s role
- Mandates strict disclosure, regulates governance and handles grievances, supporting capital market growth.
- Choose by track record, yield, asset quality, sponsor reputation, debt and NAV; track quarterly reports, occupancy (REITs) and toll trends (InvITs).
Exam angle
- Regulator: Sebi; related terms: SM REIT, NAV.
- Income: REIT is rent-based; InvIT is toll or user-charge based.