Can you earn rental-like income without buying property? REITs and InvITs explained

Indian investors are exploring for methods to achieve a steady income that resembles rental income yet does not involve buying properties. Speaking with with Zee Business, experts Pankaj Mathpal, Managing Director, Optima Money and Pooja Bhinde, Certified Financial Planner, explained how Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) are enabling exactly that.

What are REITs and InvITs?

According to Pankaj Mathpal, both REITs and InvITs are “pooled investment products,” similar in structure to mutual funds. They collect money from multiple investors and deploy it into income-generating assets.

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REITs (Real Estate Investment Trusts) invest in commercial real estate by acquiring office spaces, malls, hotels, hospitals, and warehouses. The properties are leased to tenants who create rental revenue for the company.

InvITs (Infrastructure Investment Trusts) invest in infrastructure assets through the acquisition of highways, power transmission projects and energy infrastructure assets which produce consistent cash flow throughout their operational life.

The income earned from these assets is then distributed among investors.

How do investors earn income?

Pooja Bhinde explained that these instruments allow investors to receive “rental-like income” without directly owning property. The key mechanism is regular cash distribution.

A major feature highlighted by Mathpal is the regulatory requirement that around 90 per cent of the net distributable cash flow must be paid out to investors. This creates a steady dividend-like income stream, which is similar to the rental income derived from conventional real estate properties.

Why are REITs and InvITs gaining popularity?

Experts noted several reasons behind rising investor interest:

• Investors can join at a comparatively smaller scale than when purchasing properties directly.
• They trade on stock exchanges.
• They provide investment opportunities in real estate and infrastructure without owning it directly.
• It is handled by specialised institutions.

The discussion also focused on the fact that investors have become interested in their transparency and ease of access.

Returns and market performance

The experts explained their assessment of historical performance. Bhinde said that REITs and InvITs produced competitive returns during recent years, which at times exceeded the performance of traditional equity indices that include the Nifty 50.

In 2025, REITs and InvITs showed a return of approximately 25.8 per cent, while Nifty 50 delivered a return of 11.88 percent which demonstrated strong investor interest. Nonetheless, these data are historical and do not guarantee future returns.

Experts advised against excessive investment because market conditions determine the potential returns from investments.

Risk, volatility, and structure

According to Mathpal, despite providing fixed cash flows, they remain marketable securities whose prices can change based on the forces of demand and supply and may trade either at a premium or a discount relative to the value of the underlying asset.

He highlighted the following aspects of their hybrid characteristics:

• Their functioning is partially like that of equity (marketable securities)
• Partially that of debt (fixed cash flows)
• Are supported by real assets (real estate or infrastructure)

The major difference being that unlike equities, where earnings depend on company performance, REITs and InvITs rely on long-term lease or project cash flows, which tend to be more stable.

SEBI classification and future outlook

Other important aspects related to regulation were also highlighted by the experts. According to Mathpal, the Securities and Exchange Board of India (SEBI) has been inclined towards treating REITs more as equity instruments. This will enhance their representation in mutual funds.

This reclassification is expected to broaden exposure and potentially integrate these instruments more deeply into equity allocation frameworks.

Should investors consider REITs and InvITs?

Bhinde suggested that while REITs and InvITs can be a useful part of a diversified portfolio, they should not replace equities. The stabilizing function of these assets helps to reduce market fluctuations while providing steady income streams.

Mathpal shared this perspective when he said investors need to concentrate on their asset distribution because investment products behave differently during various market conditions.

Key takeaways for investors

REITs and InvITs provide investors an exclusive investment chance which enables them to receive rental income without needing to acquire physical properties. The fund enables investors to achieve their investment goals through its combined cash flow distribution, market liquidity and asset diversification features which stem from its investment in real estate and infrastructure assets.

Financial experts recommend using this investment option together with other investments because it should not be used as an independent method for creating wealth.