Think of the most popular or well-known office parks and malls across Mumbai, Bengaluru, National Capital Region (NCR), Hyderabad, Chennai, Ahmedabad or Kolkata, and they are likely managed by one of the many real estate investment trusts (REITs).
Real estate investment trusts have emerged as major custodians of premium commercial properties in the country. Players like Embassy Office, Knowledge Realty, Mindspace Business, Brookfield India and Bagmane Prime manage some of the most prestigious and sought-after commercial real estate assets housing leading companies and companies in top Indian cities. Meanwhile, Nexus Select Trust mostly manages spaces in shopping malls.
Together, the Indian REITs have a total asset value of over Rs 3.12 lakh crore, reflecting the total combined market value of all properties and cash assets held under their management.
These REITs have been in the spotlight over the past year or so, with a strong showing in the markets after a three-year lull with low single-digit returns. The turnaround has been impressive, with four of the five listed REITs achieving returns of between 13.9% and 16.2% in the last year as of 29 May 2026 (from 29 May 2025 levels). It topped them in terms of dividends, with yields ranging from 4% to 7%.
The combination of capital appreciation and attractive income has brought REITs firmly back into investor focus, making them one of the most compelling opportunities in the market today. This was achieved during a period during which stock markets were turbulent and mostly on a negative trajectory, thanks to wars, punitive trade tariffs, energy supply, and price disruptions.
The BSE Realty index fell over 15%, the Nifty 50 Total Return Index (TRI) fell over 5%, and the broader Nifty 500 TRI was almost unchanged in the one-year time frame mentioned earlier. Its dividend yields were much lower.
Indian REITs now have a market capitalization of over Rs 2.16 lakh crore. This figure includes the market capitalization of Bagmane Prime which was listed just a few weeks ago. These five REITs distributed a whopping Rs 8,907 crore to their 4,25,000 unit holders in FY26 as dividends. By capitalizing on the seemingly insatiable demand for office space and retail outlets in malls, REITs have seen their income and profit margins expand. Regulatory support from the Securities and Exchange Board of India (Sebi) to recognize these instruments as equity-like investments, coupled with favorable taxation on dividends and guarantees inherent in REIT structures, has significantly enhanced their appeal among investors.
While geographic tension in West Asia and business disruptions due to rapid adoption of AI, especially in the technology sector, pose certain challenges, REITs appear well positioned to weather these headwinds.
Preparation
REITs focus primarily on premium grade A assets, typically located in prime locations or central business districts in metros, with advanced technological infrastructure and sustainable, energy-efficient buildings that often adhere to ESG criteria. Leading local companies, multinational corporations, technology heavyweights, and global banking and financial services companies rent space in these first-class offices.
A notable trend over the past five to seven years has been the rapid expansion of Global Capability Centers (GCCs) in India. They rank among the largest occupiers of Grade A office space in the country and have emerged as an important source of rental income for listed REITs in India.
A report by commercial real estate services and investment firm CBRE indicates that by 2028, the total absorption of Grade A office space will reach 100 million square feet, while supply is likely to reach only 79 million square feet.
“Class-1 demand appears to be solid rather than frothy. ANAROCK reports net absorption at 58.2 million sq ft in 2025 and rents grew 6% to Rs 92 per sq ft. Meanwhile, vacancy rate declined to 15.5% in Q1 2026,” says Peush Jain, Managing Director, Commercial Leasing & Consulting, ANAROCK Group.
A Nasscom-Zinnov report expects the number of GCC countries in India to rise from 1,700 in FY24 to 2,200 by FY30 and the market size to rise from $65 billion to $100 billion during the same period. Despite all these positive forecasts, could business disruption due to AI and the potential for a reduced workforce impact office demand?
Ramesh Nair, CEO and MD, Mindspace REIT, sees AI impacting demand. “The AI narrative has been active over the last three years, but office demand has continued to grow during that period. We have also seen some companies adopting AI continue to occupy office space in India, and large IT services companies that gave up space during Covid are coming back and leasing more space. We believe AI is more likely to accelerate the journey to quality rather than destroy office demand at scale,” says Nair.
“Tech layoffs should result in limited near-term headwinds for REITs. Demand is no longer just for technology, and the GCC leads India’s Grade A office market at 47% of gross rent in Q1 2026, up from 36% in Q4 2024,” adds Anarock’s Piyush Jain.
Another key aspect is that many global companies are increasingly doing sophisticated work from Indian office spaces, and are not just focusing on software services.
“Contrary to AI concerns, we see work from India moving up the value chain,” says Shirish Godbole, CEO, Knowledge Realty Trust. “The GCC does high-quality work and gives us 45% of our total rentals. Another 31% of our rentals come from client-facing front office assets. They are insulated from the impact of AI.”
The war in West Asia and the rise in energy prices also do not appear to have caused any serious harm to occupancy and leasing decisions.
A few REITs actually meet the criteria to be included in Mid-cap index, Nifty 500, etc. Once listed, this will lead to inflows from passive funds and ETFs.
– Rahul Jain,Head of Public Markets, Alternative Investment Platform
“There have been some challenges in the near term. We have seen travel disruptions and airspace restrictions impacting transaction timelines in the market, and there have been instances where occupiers have become more cautious about deploying capex or slowed down decision-making. The fundamentals of demand remain sound. In one case, a GCC requirement for 200,000 sq ft space in Hyderabad was temporarily halted due to the war, but the same space was leased to other GCC countries within 15 days at a higher rent,” Nair adds.
“Office completions in Q1 2026 were down 18% year-on-year, partly due to West Asia-related disruptions. This suggests that occupiers and investors have largely weathered the shock, particularly in key stocks,” Piyush Jain adds.
In a recent conference call with analysts, Alok Aggarwal, CEO and managing director of Brookfield REIT, said the war would not affect GCC countries’ decisions to move to India.
While the demand for office space is well established, what about mall space?
“Leading local and global brands continue to prioritize high-yield malls that offer scale, visibility and consistent consumer catchments,” says Pratik Dhantara, Head of Strategy, Nexus Select Trust. “This also translates into healthy leasing momentum and rental growth for high-quality assets, even as the broader market remains selective.”
“Organized retail continues to gain share, and differentiation trends across categories are strengthening,” says Dantara.
Catering to investors
REITs are essentially similar to mutual funds in the way they operate. These real estate funds invest in commercial spaces with a rental yield. REITs typically tend to own and operate these properties via special purpose vehicles (SPVs). Each REIT SPV tends to manage one specific property. Typically, there are several SPACs operating within most listed REITs.
Sebi has mandatory provisions for the functioning of REITs that act as guardrails for investors. At least 80% of the assets owned by the REIT must be invested in income-producing commercial properties.
These entities are also expected to distribute at least 90% of their net distributable cash flows (NDCF) on at least a quarterly or annual basis. The NDCF roughly represents income earned from rentals, less expenses incurred to operate the assets. Most listed REITs tend to distribute well above this limit to unit holders.
REITs are also not allowed to borrow beyond 49% of their gross asset value (GAV). Any other debts require shareholder approval. The loan-to-total asset value ratio is 18% to 32% for the five listed REITs as of FY2026, which is well below the regulatory limit. All listed REITs have the highest credit rating of “AAA”.
Sebi has reclassified REITs as stocks with effect from January 1, 2026. They enjoy equity tax – profits made on sale of units held for more than a year are taxed at 12.5%. The portions of dividends paid to unitholders under certain headings, such as loan repayment, are considered tax efficient. Typically, 70-90% of profits are tax efficient. They are not subject to tax until those payments exceed the acquisition price of the REIT.
IT services companies that gave up space during the coronavirus are now leasing more space. AI is likely to accelerate the journey to high-quality office space.
– Ramesh Nair,CEO and Managing Director of MINDSPACE REIT
“Sebi’s move to classify REITs can encourage participation of mutual funds and specialist mutual funds, improve liquidity and deepen price discovery by bringing them closer to mainstream portfolio distribution. It also removes the perception of ‘alternative assets’ for retail investors,” says Piyush Jain.
“This decision brings India in line with global best practices for inclusion of REITs within equities,” says Rahul Jain, head of public markets at Alt (alternative asset investment platform). There are a few REITs that already meet the criteria to be included in the mid-cap index, Nifty 500, etc. Once they are listed, it will also lead to inflows from passive funds and ETFs tracking these indices.”
Overall, REITs stand on a solid footing for the foreseeable future. As evidence of this, India’s largest value-based mutual fund scheme with Rs 1.41 lakh crore assets under management, Parag Parikh Flexi Cap, has a strong exposure of 4.1% to REITs.
