Strong returns, steady cash flows and diversification benefits are making REITs and InvITs attractive alternatives to traditional equity and debt investments
India’s listed Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) emerged as top performers in 2025, delivering a combined equal-weight return of 19.55 percent, outperforming the Nifty50 Total Return Index’s 11.42 percent and the G-Sec Index’s 6.81 percent, according to ICRA Analytics data based on InfRE360 and NSE as of February 2, 2026.
These hybrid instruments, which blend stable income streams with capital appreciation potential, have attracted growing investor interest amid heightened market volatility. Let us understand what REITs and InvITs are, how they differ in terms of underlying assets and cash-flow visibility, why they are increasingly viewed as alternatives to traditional equity and debt investments.
According to ICRA Analytics data REITs nearly doubled their returns, rising from 16.81 percent in 2024 to 29.68 percent in 2025, reflecting sustained leasing momentum and consistent yield profiles. Power InvITs advanced from 9.43 percent to 20.22 percent, reflecting operational resilience and market conditions, whereas Road InvITs dipped from 9.49 percent to 6.55 percent, highlighting mixed performance trends across infrastructure linked assets and the impact of new listings.
Understanding REITs and InvITs
REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts) are investment vehicles that allow investors to gain exposure to real estate and infrastructure assets without directly owning the underlying properties.
What are REITs?
Real Estate Investment Trusts (REITs) are pooled investment instruments, similar to mutual funds, that invest in income-generating real estate assets. They offer investors an alternative route to participate in the real estate market without buying physical property. REITs are mandatorily listed on stock exchanges and can be bought and sold like regular shares of listed companies.
Features of REITs
The structure of the REITs is similar to a mutual fund; there is a sponsor, a management company and a trust. The trust holds the real estate assets on behalf of the unit-holders and safeguards their interests, while the management company is responsible for managing and operating the property portfolio. This structure is designed to enhance transparency and investor protection.
REITs earn income primarily through rentals from their real estate assets and capital gains from the sale of properties. The distributable income is calculated after accounting for operating expenses, portfolio management costs and fees paid to various stakeholders, including the manager and trustees.
What are InvITs?
Infrastructure Investment Trusts (InvITs) are investment vehicles that enable investors to participate in infrastructure assets such as roads, power transmission lines and renewable energy projects. InvITs were introduced to open up infrastructure investing, earlier dominated by large institutions, to retail investors. By investing in a diversified basket of infrastructure projects, InvITs can offer relatively stable cash flows along with long-term capital appreciation, while also channelising household savings into infrastructure development.
InvITs are investment vehicles is also similar to mutual funds or REITs, but they invest in infrastructure assets such as roads, power transmission lines and other core infrastructure projects.
Features of InvITs
InvITs are established by sponsors, usually infrastructure developers or private equity firms. The sponsor sets up the trust and transfers the underlying infrastructure assets to it. The trust, in turn, issues units to investors, with each unit representing a proportionate ownership interest in the trust and, indirectly, in the infrastructure assets it holds.
What are taxes on REITs and InvITs ?
Taxation of REITs and InvITs is governed by Section 115UA of the Income Tax Act, which grants them pass-through status. This means the income earned by the trust is taxed directly in the hands of unit holders, as if they had earned it themselves, thereby avoiding taxation at both the trust and investor levels.
The tax liability varies based on the nature of income. Interest income is taxed according to your applicable income tax slab. Rental income and dividends received from REITs are also taxed at slab rates. Gains from selling REIT or InvIT units are treated as capital gains—short-term capital gains are taxed at 20 percent, while long-term capital gains are taxed at 12.5 percent.
Why REITs and InvITs are gaining popularity?
The growing popularity of REITs and InvITs stems from their ability to provide investors with both steady earnings and enduring capital protection. “Their returns differ from traditional equities because they generate revenue through physical properties, which include office parks, warehouses, highways, and power transmission networks. Their physical assets generate steady cash flows, which investors can easily track. These assets produce consistent revenue streams. Their physical assets generate steady cash flows, which investors can easily track because these assets produce consistent revenue streams,” said Amit Prakash Singh, Co-Founder & CBO, Urban Money.
Who should invest in REITs and InvITs
REITs are suitable for investors who would like to quickly gain exposure to commercial real estate without having the responsibility of direct ownership. “REITs are appropriate investments for those investors seeking the benefits of income-producing business properties such as office space, retail space, and leased properties, which offer stable returns in the form of rental income as well as long-term capital appreciation,” said Shorab Upadhyay, Managing Director, TRG Group.
“For InvITs, the target class of investors could be those who want to benefit from investing in roads, power transmission, etc., as these sectors usually have long-term contracts to ensure the revenue generated from such investments is steady,” Upadhyay said.
“In short, REITs are great for income driven investors with a real-estate tilt, while InvITs are great for investors looking to bet on the Indian infrastructure growth story at a lower operational volatility and with completely converging or near converging yields,” Singh said.
