3 weeks ago
REITs are equity, not fixed income, says Radhika Gupta
A REIT is a kind of company that owns big buildings, like offices and malls, and collects rent from the people inside them.
Some people think REITs are like bonds, which are safe loans that pay a fixed amount.
Two experts in India say that is a mistake.
They say REITs are more like stocks, because the money you get and the price of your shares can go up and down.
REITs usually pay out about 5-6% each year, which is more than most stocks pay as dividends.
But a REIT does not promise to give your money back, and it has no fixed payment date like a bond does.
The rules in India ask REITs to share at least 90% of their cash with investors and to buy mostly buildings that are already rented out.
REITs are less jumpy than regular stocks, but they can still lose value.
This is why the Indian regulator treats them as equities, not as safe fixed income.
Radhika Gupta, MD & CEO of Edelweiss Mutual Fund, says REITs are an equity asset class, not fixed income.
REIT yields are typically around 5-6%, materially higher than the broader equity market's dividend yield.
SEBI requires REITs to distribute at least 90% of net distributable cash flows and invest at least 80% of assets in completed rent-yielding properties.
A pure-play REIT index has shown volatility of roughly 10-11%, lower than India's equity market volatility of around 14-16%.
From 1 January 2026, REIT investments by mutual funds and SIFs are treated as equity-related instruments; from 1 July 2026, REITs became eligible for equity indices.
- Who
- Radhika Gupta, MD & CEO of Edelweiss Mutual Fund, and Vaibhav Porwal, Co-founder of Dezerv.
- What
- Explanation that REITs are an equity asset class with cash-flow-generating real estate, not fixed-income investments.
- Where
- India.
- When
- Discussed around SEBI's November 2025 circular, with classification rules taking effect from 1 January 2026 and 1 July 2026.
- Why
- Because investors mistake REITs' regular 5-6% distributions for fixed-income returns, while SEBI classifies them as equity as they lack fixed maturity, promised coupons, and repayment of principal.
Key facts
- What are REITs
- Listed trusts owning income-generating commercial real estate
- Typical REIT yield
- Around 5-6%
- SEBI distribution requirement
- At least 90% of net distributable cash flows
- Asset investment rule
- At least 80% in completed rent-yielding properties
- Leverage cap
- Below 49%
- Indian equity market volatility
- Around 14-16%
- Pure-play REIT index volatility
- Roughly 10-11%
- Equity classification effective dates
- 1 January 2026 for mutual funds and SIFs; 1 July 2026 for equity index inclusion
Quotes
Vaibhav Porwal
Co‑founder of Dezerv
“"SEBI requires REITs to distribute at least 90% of their net distributable cash flows, invest at least 80% of assets in completed rent‑yielding properties and keep leverage below 49%."”
livemint.com
“"Too many investors still think of REITs as fixed income. They aren't. They're an equity asset class with cash flow-generating real estate underneath."”
livemint.com
Sources
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