New Delhi: The Indian market for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) is poised for rapid growth and is expected to grow more than threefold by 2030, as per the real estate and property consultant Knight Frank India.
REITs and InvITs are investment vehicles that pool investment from investors to buy and operate income-generating properties and infrastructure projects, respectively. REITs focus on real estate assets like office buildings and malls, while InvITs focus on infrastructure assets such as roads, power plants, and airports.
This surge is driven by an expanding office supply and infrastructural development projects that are currently being undertaken in the government. Additionally, attractive and stable yields ranging from 12 to 16 percent are making them an alternative viable investment option. Further, the rising interest from both institutional and foreign investors.
Knight Frank predictions on REITs and InvITs
In an interview with Moneycontrol, Rajeev Vijay, Executive Director, Government and Infrastructure Advisory, Knight Frank India, emphasized the increased interest in REITs and InvITs because of high-yielding investment returns. He explained that these investment options are high-yield structures offering a rate of return between 6 and 8 percent regular income, further complemented by an additional 4-8 percent growth return. This overall 12–16 percent return profile makes them highly attractive to global investors, he added further.
Vijay compared the current stage of REITs and InvITs in India to the mutual fund industry five to seven years ago, underscoring the importance of investor education. A defining strength of InvITs lies in their stability, as they are backed by operational, income-generating assets. Knight Frank further noted that these cash flow-driven businesses come with lower volatility, and they are considered yield plays.
The simplified taxation could further unlock more retail participation in these real estate investment tools. With growing domestic savings channeled into equity markets, similar flows could move into InvITs if tax policies are made investor-friendly, offering consistent yields without the risks of equities.
Domestic institutional investors are also expected to play a greater role. While foreign pension funds from Canada, the Middle East, and the U.S. have been early movers and earned significant interest on their investment, domestic players such as mutual funds, insurance firms, and pension funds have been largely absent. Increasing their investment limits could significantly deepen the market.