India's Real Estate Investment Trust (REIT) market has travelled a considerable distance since the country's first listing in 2019, yet it remains one of the smallest major REIT markets globally. The introduction of Small and Medium REITs (SM REITs), growing institutional participation and a sizeable pipeline of income-generating commercial assets have placed the sector at a critical juncture. For investors, developers and policymakers, understanding how REITs work and why their role is expanding has become increasingly important as India seeks to deepen its real estate capital markets.

At the heart of this evolution lies a simple question: can REITs do for real estate what mutual funds did for equities by making institutional-quality assets accessible to a broader investor base

What is a REIT and why was it created?

A Real Estate Investment Trust, or REIT, is a professionally managed investment vehicle that owns, operates and manages income-generating real estate assets. These typically include office parks, shopping centres, warehouses, data centres and other leased commercial properties.

The structure allows multiple investors to pool capital and invest in large-scale real estate assets without directly purchasing or managing property. In return, investors receive a share of the rental income and potential capital appreciation generated by the underlying assets.

The concept emerged in the United States in the 1960s with the objective of democratising access to commercial real estate. Over time, REITs evolved into one of the world's most important real estate investment structures, enabling retail and institutional investors to participate in large property portfolios through publicly traded securities.

In India, REIT regulations require trusts to distribute at least 90% of their distributable cash flows to unitholders. This distribution-focused model has made REITs attractive to investors seeking regular income while gaining exposure to professionally managed commercial assets.

For developers, REITs serve a different purpose. They provide a mechanism to monetise completed, income-generating assets and recycle capital into new developments. This ability to unlock value from mature assets has become an increasingly important source of funding for the real estate sector.

India's REIT journey: From one listing to a trillion-rupee asset class

India entered the REIT era in 2019 when Embassy Office Parks launched the country's first listed REIT.

Since then, the sector has witnessed rapid growth.

Market capitalisation has increased from INR 264 billion in FY20 to approximately INR 1.6 trillion in FY25, representing a six-fold expansion within five years. During the first nine months of FY26 alone, market capitalisation rose further to around INR 1.726 trillion.

The growth has been equally evident in asset values. Gross Asset Value (GAV) across India's REIT market expanded from approximately INR 330 billion in FY20 to more than INR 2.1 trillion in FY25, reflecting a compound annual growth rate of roughly 40%.

India's REIT market currently comprises five listed trusts, each offering investors exposure to income-generating commercial real estate assets. The sector began with the listing of Embassy Office Parks REIT in 2019 and has since expanded to include Mindspace Business Parks REIT, Brookfield India Real Estate Trust, Nexus Select Trust and Knowledge Realty Trust. While Embassy, Mindspace, Brookfield and Knowledge Realty are primarily focused on office assets, Nexus Select Trust marked a milestone as India's first listed retail REIT. Together, these five REITs manage approximately 174 million sq ft of leasable space, including around 134 million sq ft of Grade A office stock, equivalent to nearly 15% of the country's premium office inventory. Their presence has not only created a new investment avenue for capital market participants but has also established a transparent and regulated framework for institutional ownership of commercial real estate in India. 

The figures indicate that REITs have moved beyond an experimental investment structure and become an important component of India's commercial real estate ecosystem.

How REITs transformed global real estate markets

The success of REITs globally demonstrates how significantly the model has altered real estate ownership structures.

Today, the global REIT market is estimated at approximately USD 2 trillion, having expanded from around USD 1.2 trillion in 2024. Industry projections suggest the sector could reach between USD 2.1 trillion and USD 3.8 trillion by 2033, supported by a compound annual growth rate of roughly 7.2%.

The United States remains the undisputed leader, accounting for more than USD 1.43 trillion in REIT market capitalisation and over 70% of the global market. Institutional ownership of commercial real estate through REIT structures has reached approximately 96% in the US.

Europe represents a market worth nearly USD 494 billion, while Asia-Pacific contributes around USD 594 billion. Mature Asian markets such as Japan and Singapore have institutionalisation rates of approximately 51% and 55%, respectively.

The widespread adoption of REITs across these markets has delivered benefits extending beyond investment returns. REITs have enhanced transparency, improved governance standards, increased liquidity in property markets and broadened access to institutional-grade real estate.

The opportunity hidden in India's institutionalisation gap

Despite this growth, India's REIT market remains relatively small compared with international benchmarks.

At roughly USD 19 billion, India's listed REIT market accounts for less than 1% of the global REIT universe. Institutionalisation of commercial real estate is estimated at around 20%, significantly below the 96% seen in the United States and lower than major Asian markets.

For industry observers, this gap represents one of the sector's most compelling growth opportunities.

Speaking at CREDAI NATCON Singapore, Shekhar Patel, President of CREDAI, noted that India's REIT penetration remains substantially below developed markets despite encouraging progress over recent years. He highlighted that the country's institutionalisation rate of around 20% remains well below levels recorded in the US, Singapore and Japan.

The implication is clear: if India's commercial real estate market continues to mature, a significantly larger portion of assets could eventually migrate into institutional ownership structures.

SM REITs: The next chapter in market evolution

While conventional REITs have focused primarily on large institutional portfolios, SM REITs are designed to bring smaller commercial assets into the regulated investment ecosystem.

Under the new framework introduced by SEBI, conventional REITs require a minimum asset pool of INR 500 crore. SM REITs, by comparison, can be launched with asset pools ranging between INR 50 crore and INR 500 crore.

The framework effectively creates an institutional pathway for mid-sized income-generating commercial properties that previously lacked access to listed investment structures.

The significance of the move extends beyond regulatory reform.

According to CBRE's report, From Niche to Next Wave: SM REITs Forging Real Estate Investment Frontiers, SM REITs have the potential to reshape the investment landscape by bringing mid-sized commercial assets under a structured and regulated ownership framework.

Anshuman Magazine, Chairman and CEO for India, Southeast Asia, Middle East and Africa at CBRE, has stated that the framework is creating new opportunities for asset owners and investors alike by expanding the universe of investable commercial real estate.

Who stands to benefit from SM REITs?

The introduction of SM REITs has implications for multiple stakeholder groups. For retail investors, smaller asset pools create opportunities to participate in commercial real estate that was previously accessible mainly through larger institutional structures.

For developers and property owners, SM REITs offer an alternative monetisation route for mature assets. Industry estimates suggest office properties worth approximately INR 67,000-71,000 crore could potentially qualify for SM REIT structures.

For asset managers, the framework opens a new investment segment at a time when demand for alternative investment products continues to rise.

For policymakers, greater institutionalisation could improve transparency, governance standards and liquidity across commercial real estate markets.

What comes next for India's REIT market?

The first phase of India's REIT story was focused on establishing credibility. The success of the country's initial listings demonstrated that investors were willing to embrace professionally managed, income-generating real estate vehicles.

Shishir Baijal, Chairman and Managing Director of Knight Frank India, has observed that India's commercial real estate transformation is increasingly being driven by globally integrated businesses, technology-led occupiers and evolving workplace strategies. Such trends continue to strengthen demand for high-quality commercial assets that are typically preferred by REIT investors.

According to Dr. Samantak Das, Chief Economist at JLL, India's REIT ecosystem could witness a five-fold expansion over the next four years. In JLL's Emerging Horizons report, Das estimated that investment-grade office assets worth USD 66-68 billion and retail opportunities valued at USD 32-33 billion across the country's leading cities could support future REIT growth.

CBRE expects additional REIT listings across offices, retail assets and warehousing portfolios as asset owners increasingly seek efficient monetisation platforms. Meanwhile, Knight Frank's Viral Desai has argued that future growth must be accompanied by a stronger emphasis on asset quality, sustainability and global-standard asset management practices.

Five years ago, India's challenge was convincing investors that REITs could work. Today, the challenge is determining how large the opportunity can become. With a growing pipeline of institutional-grade assets, rising investor participation and the emergence of SM REITs, the sector appears to be entering a new stage of development one that could fundamentally change how commercial real estate is owned, financed and invested in across the country.

Sources: JLL Emerging Horizons Report (2025); CBRE – From Niche to Next Wave: SM REITs Forging Real Estate Investment Frontiers (2025); ANAROCK-CREDAI Report (2025); Knight Frank India Reports (2025); SEBI SM REIT Regulations; Listed REIT disclosures and investor presentations.