REIT : Real Estate Investment Trust

author portrait

Divya Singhvi

Income from Other Sources
Income Tax
Last updated on November 9th, 2023

Real estate is one of the vital sectors of the Indian economy which has contributed a lot to rapid economic growth. However, investing in real estate is not easy as it involves huge investments. For small and retail investors to participate in real estate, Real Estate Investment Trust(REIT) is the best investment option. REIT is an investment vehicle that enables individual investors to earn income through real estate without having the hassle of managing the properties physically or shelling out huge monies.

What is a REIT?

REIT is an investment vehicle that raises funds from sponsors and investors and invests in income-generating properties ranging from office spaces to hospitals, shopping centres, hotels, and warehouses. The REIT either directly or through a Special Purpose Vehicle (SPV) invest in real estate properties and generate income either by renting out or by giving loans. The concept of REIT is similar to Mutual Funds that pool small sums from individuals and institutions and invest in stocks. The unitholders earn in the form of dividends and interest distributed by the REIT.

Types of REIT

It is the most popular type of REIT. The majority of REITs are publicly traded equity REITs. Equity REITs own or operate income-producing commercial properties. The common source of income here is rent.

It is mostly involved in lending money to proprietors and extending mortgage facilities and is commonly known as mREITs. REITs provide financing for income-producing real estate by purchasing or originating mortgages and mortgage-backed securities and earning income from the interest on these investments. Mortgage REITs also generate income in the form of interest accrued on the money they lend to proprietors.

Investors can diversify their portfolio by parking their funds in both mortgage REITs and equity REITs. Hence, both rental income and interest income are the sources of income for this particular kind of REIT.

Public non-listed REITs (PNLRs) are registered with the SEBI. However, they are not tradable on the National Stock Exchange. These options are less liquid. Also, they are more stable as they are not subject to any market fluctuations.

Private REITs are exempt from SEC registration and whose shares do not trade on National Stock Exchanges. These trusts function as private placements, which cater to a selective list of investors.


REITs need to fulfill the below compliances for their qualification as per SEBI guidelines 2019:

Find the best plan
Find the best plan
Find the best plan
Find the best plan

Advantages of Investing in REIT

The following are the benefits of investing in REIT:

Option to Diversify

As REITs are usually traded on stock exchanges, it gives investors the benefit of diversifying their real estate portfolio.

Dividend Income and Capital Appreciation

Individuals investing in REITs get the benefit of steady and substantial dividend income and over the long term, it also allows steady capital appreciation.


As REITs are mostly traded on stock exchanges, it becomes very easy to buy and sell them, hence adding the benefit of quick liquidity.

Risk-Adjusted Returns

REIT offers its investors the advantage of earning risk-adjusted returns that help generate a steady force of income for them. During the time of high inflation, investing in REIT can help in having a steady source of income.

How to Invest in REIT?

Just like any other stock, investors can buy shares in a particular REIT in three ways:

Stocks: Individuals who are looking to invest in a direct way in REIT go for this option.

Mutual Funds: Investors who wish to have a diversified portfolio invest in REITs through mutual funds.

Exchange-Traded Funds: This option is for those investors who want to avail indirect ownership of properties and also want to benefit from its diversification.


Taxability of REITs

In the hands of Unit Holders


Is REIT dividend taxable?

Yes, if the underlying SPV in which the REIT has invested opts for Section 115BAA concessional tax scheme, then the dividend will be taxable in the hands of unitholders.

What are famous REITs in India?

The majority four listed REITs in India are:
1. Brookfield India Real Estate Trust
2. Embassy Office Park REIT
3. Mindspace Business Park REIT
4. Nexus Select Trust

What are the sources of income for REIT?

The major source of income for REITs is Rent. Apart from that they also earn from dividends declared by SPVs and interest on debt given to SPVs.

Got Questions? Ask Away!

  1. Hey @Shweta_Saini

    Unit-holders receiving any income distributed by trusts such as interest or dividend shall be treated as income of the unit-holder for that previous year subject to provisions of the Act.

    You can read more about it here:

    Hope this helps!

Continue the conversation on TaxQ&A

1 more reply


Avatar for Yesha Avatar for Shweta_Saini Avatar for Shrutika_Shah