Why Reits Are Gaining Popularity Among Indian Investors In 2026

TITLE: Why REITs Are Gaining Popularity Among Indian Investors in 2026 CHANNEL: NDTV Profit DATE: 2026-02-19 ---TRANSCRIPT--- [music] Hello and welcome viewers. This is Malik Mishra on NDTV Profit and you’re watching your money matters. Today we’re diving into two very interesting subjects. While mutual funds are excellent for systematic income, there’s another asset class that has been quietly delivering strong regular payouts without you buying a single flatter or shop. Let’s talk about reads. Real estate investment trusts. REITs the hottest conversation in personal finance right now. We’ll cover what exactly are REITs? Why did they beat both equities and government bonds throughout 2025? The five listed REITs just distributed a massive 2,450 cr to over 3.8 lakh unit holders in one quarter alone. So that’s a massive sum of money. Who should invest? What should your 2026 portfolio allocation look like in the context of RES? and the game-changing RBI decision, what it means for dividends, regular income, potential and a lot more. So to answer these questions, I have with me Shares Sheresh Gole, CEO at Knowledge Realy Trust. Thank you so much Shish for joining us. Uh my first question is quite basic.

Uh in simple terms, what are REITs and who should be investing in them and would you advise young investors to get into REITs? Thank you. Thank you for having me and there seems to be a lot of questions so we’ll try and answer as quickly and as succinctly as possible. Uh but I think and you alluded to mutual funds to start with as well. I think the best way to explain what a REIT is is the fact that it’s a mutual fund. It’s like a mutual fund. You know a mutual fund has a lot of holdings and then on the other side it has a lot of unit holders who hold units in the mutual fund. And a REIT is exactly similar. So a REIT is a trust, a real estate investment trust, but really likened to a mutual fund, which below it has a bunch of physical assets that it owns. And then on the other side, it issues units. So anyone who literally can buy one unit and own a piece of the real estate, but doesn’t obviously have to buy the whole real estate, just buys that one piece of paper, right? And it could be, I mean, our shares trade today at 126 rupees. Let’s say you could buy a share at 126 rupees or you could buy obviously a lakh shares at that same price. But it really and this is what it was conceived for is the common man can own a piece of real estate which otherwise would have required lacks crores of rupees to buy and a common man could not have bought right and that’s what the REIT really really drives home which uh I think is a great uh opportunity uh for a common man to own real estate and sorry your other question was about I think young investors should get into REITs and how do you compare these with regular mutual funs? Yeah. So, uh I mean it’s it’s it’s a lot of uh I think to answer that question. One, should one buy a real estate investment trust? The answer is absolutely yes. Okay. And I think it may cover many of your other questions. So, give me two minutes to answer because a real estate investment trust gives you both a stable yield and the opportunity for growth. And you know, very few products in sort of the finance space offer you both, right? There are fixed income products which give you a yield and there’s equity instruments, equity stock which gives you growth opportunities. This one is a combination of the two because what we have is a number of assets right which we own and that distributes a yield which we pass on to the unit holders typically about 6% plus or minus and that’s a pretty efficient tax model in which it’s distributed. So really you have to compare it on a pre-tax basis with fixed income products. So our pre-tax yield could be comparable to almost 8% let’s say and so post tax it comes down to 5.66 which is what we distribute. So it’s very attractive from a yields perspective and at the same time and at the same time it gives you growth because the value of our assets increases. We have rental appreciation built into our leases plus the value appreciates and that growth comes in as well. So when you combine the two it is a great stability and yet growth. So no. So what’s the range of the average range of returns that reads uh offer? So we typically give anywhere between a 5 to 6% effectively post tax yield that’s distributed on a quarterly basis. All right. And on top of that our rents appreciate 5% per year at a minimum. They could go higher. And so therefore you get a little bit of stability. like I said here plus that growth. So together a 12 to 15% return annually for a REIT is a very decent assumption to make. Okay. Um I have a very fundamental question to understand how reads work. Uh you would explain the um the return aspect of it. But for example, if there is a real estate investment trust that’s handling a couple of properties, how does that distribution work? And how exactly does the money finally flow into an investor’s account in terms of returns? Could you give an example with for example a reed handling say an office um and a mall? Yeah. So how so I mean I think in both cases they’re quite similar. So you have a physical asset in our case KRT we have a number of offices right? We have one BKC right here in BKC. We have a lot of tenants who occupy that space. So what the tenants do is they pay us rent on a monthly quarterly basis, right? We collect that rent. We pay expenses to manage the premises and there is a net operating income left after you know all of those expenses, the tax and other things that we have to take care of and so you end up with a distributable cash flow that’s available. The way regulations have been set up two things about reach which are very important to note. one at least 80% of our assets have to be physically fully completed built leased assets right so it’s very different from a real estate company which is in the business of owning land developing land etc we are primarily in the business of operating assets so most of our assets are yielding they’re tenanted we have income that’s coming and number two rule of a REIT is most of what we have as cash flow has to be distributed 90% So literally 90% of it at least right in our case we’re distributing all of it but at least 90% of it. So now we have collected this rent this this cash flow is left over and then that has to be distributed out and so literally we make payments to all our unit holders depending on whether you have one unit 100 units lack units etc. We calculate that and it’s a tedious job actually and we actually make the payments out and there’s nothing left and the next quarter it starts over again and the next quarter it starts over again. So that’s it’s very simple. It’s very I think very transparent and very clean. And one of the reasons reach have been more and more accepted is you know it is now very well governed. You know there are very professional management teams in place. It’s a very institutionalized transparent product which is what has led to people believing in it more and more. Okay. And I think another move uh and I would like to get your opinion on RBI easing regulations on REITs as well in the most recent regulation that came in where now REITs can borrow money from commercial banks as well which was not the case before now that makes borrowing costs cheaper and for example it would also increase the dividend payout that ultimately goes to the unit holder. What is your opinion on the acceptance of REIT today and in the decade to come and as we were just having a conversation before this interview started what do you think what kind of assets would be most promoted under so first of all regulatory support we have had tremendous regulatory support and it’s not just the RBI but the SEBI has also been very supportive of getting this product out in the market as I was mentioning earlier it is the easiest way for a common man to own piece of real estate. So, uh, commendable effort by both. This latest move by RBI really is a financial move, uh, which helps us because it, like you said, reduces the cost. It has more people that can offer us debt. Right now, the reality though is REITs as a product have very low LTVs, very low loan to values. So while it is a good move and definitely helpful, it is not going to dramatically change what we do because you know we are set up to own assets. We have the assets we have. We have low gearing, low financing. Yes, we can lower our rates a little bit more which will allow us to have slightly higher distributions. And to us, you know, like I said, there are two real cornerstones of any REIT, which is distributions and then rental appreciation, right? because that’s how we get our growth. And today what this does is it allows us to get our yields slightly further up because the financing becomes a little bit cheaper. That allows us to get the yields up which should help distributions which should help unit holders ultimately. So that’s the current move. But SEBI has also been very very good. The other move that happened last year is um making a REIT equity product. What that classification has done and this was Sebie coming uh coming to do this was very very powerful because now all equity mutual funds will look at REITs as a option that wasn’t available before. So before what before we were considered to be more of a fixed income instrument and so we had the status where mutual funds who had a hybrid status or mutual funds who had a fixed income focus could invest with us right and so there are a lot of funds do have hybrid um sort of funds within uh kota core ICICI etc. So, so they could invest with us before but the so-called equity only mutual funds could not technically invest in a REIT. Now what that does is now any fund effectively can invest right and so clearly the number of potential investors has gone up. We are seeing a lot of interviews meetings with mutual funds interested in buying REIT product that will help further distribution that will help further growth of the product. So regulatory support for our product has been very good and we are very thankful you know for it. Um we’ve spoken about the various advantages of REITs and how it ticks many boxes but I think it is also important to understand a disclaimer that REITs comes with. What kind of risks should one consider before investing in REITs? Yeah before I answer your question I’m sorry I’m going to answer a different question which is actually why should a common man own REIT versus owning physical real estate and then I’ll come to your disclaimer because that is a very important question right so if you step back in India you know people love to own real estate and I mean the the just getting in and out is so hard the amount of money you need typically I mean the smallest thing is now a cr I mean how many people are walking around with the ability to just shell out a cr to buy real estate even if it’s residential right then even if you own an asset you have to lease it out to someone if it’s an investment and you have to manage it there are repairs maintenance costs and after all that the yield you get is not something great right I mean in a residential it’s pretty low 3 4% in an office format yeah you might get 7% but then there are all these costs that get into it so when you look at that net result of the whole experience the friction cost of getting in getting out illli liquidity of the product. Why would you not simply just buy a RE share which gives you a 6 to 7% kind of yield or maybe eight on a sort of a pre-tax basis when you look at it. You don’t have any of the management issues. You get in and out easily. It’s very liquid. You can go and sell it tomorrow. Therefore, I think the common man should really look at this. Uh and as far as um you know issues to watch out for I mean you know honestly again this is a bit of a sort of anecdote again but you know we look at ourselves I look at KRT knowledge realy trust we have you know a 55,000 cr market cap we are like a luxury liner cruise ship I mean seriously think about the ocean and your cruise ship out there it’s going to take a lot to topple the cruise ship right there will be small issues here and there but the size of the portfolio the diversity of the portfolio just allows you to be you know sailing through troubled waters pretty easily. So in terms of risks I mean of course there could be a covid again the world of office demand could change dramatically at some point of time but today there is tremendous support both for India’s growth and you know GDP as you know is growing up further uh so therefore there’s tremendous growth for office demand internally and you’ve got this whole GCC story you know which is the global capability center story which continues to support offices going forward. So when you look at that at least in the short run we really don’t expect any risk factors that are significant. Okay. Uh but in the long run very high interest rates you know coidl like phenomena big change in the way people consume real estate uh whether it’s residential whether it’s office obviously could have an effect on us but in the short run I feel very excited and very comfortable with what we have. Understood. Thanks so much. It felt like a crash course and reads done in 15 minutes or so. Thanks so much. It was a pleasure having you and viewers. So in 2026, REITs have become a serious regular income contender thanks to strong 2025 performance and the RBI’s recent moves that are likely to support higher dividends as well. And it’s not just the RBI, but as Mr. Goodbully highlighted, it’s the SEBI as well that has supported this form of investment. They suit investors who want real estate exposure with liquidity and quarterly payouts. [music]