REITs on Zerodha

Real Estate Investment Trusts (REITs) are investment vehicles that own income-producing real estate assets and distribute a mandated proportion of their income to unitholders. In India, REITs are regulated by SEBI under the SEBI (Real Estate Investment Trusts) Regulations, 2014, as amended. REITs are listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) and can be bought and sold like equity shares through Zerodha’s Kite platform.

India’s first REIT, Embassy Office Parks REIT, was listed in April 2019. As of 2025, listed Indian REITs include Embassy Office Parks, Mindspace Business Parks, Brookfield India Real Estate Trust, and Nexus Select Trust (retail malls).

Structure and regulatory framework

SEBI (REIT) Regulations, 2014

SEBI’s REIT Regulations define the structural requirements:

• A REIT must have a minimum asset size of Rs 500 crore.
• At least 80% of the REIT’s assets must be in completed and rent-generating properties.
• At least 90% of net distributable cash flows (NDCF) must be distributed to unitholders at least twice a year.
• A REIT must have a sponsor (the original developer), a manager (managing the assets), and a trustee (a SEBI-registered entity holding assets in trust for unitholders).

SEBI amended the REIT Regulations in 2021 to allow:

• Small and Medium REITs (SM REITs) for fractional real estate.
• Reduced minimum investment for REITs from Rs 50,000 to Rs 10,000 to improve retail access.

Minimum investment

The minimum investment lot for REITs on exchange is one unit. As of 2025, REIT units trade between Rs 200 and Rs 500 approximately, making the minimum investment per unit accessible to retail investors. This is far lower than the previous Rs 50,000 minimum at IPO stage.

Indian REITs: overview

How REITs trade on Zerodha

REITs trade on NSE and BSE under the equity segment. On Kite:

1. Search for the REIT ticker (e.g., “EMBASSY” for Embassy Office Parks REIT on NSE).
2. Place CNC order for delivery holding or MIS for intraday.
3. Units are credited to the demat account at CDSL on T+1.

REIT units can be held in the demat account and pledged for collateral margin via the pledge mechanism. See pledge and collateral margin on Zerodha.

Distributions

REITs distribute income in three components, each with different tax treatment:

1. Dividend component: From dividend income received by the REIT from SPV (Special Purpose Vehicle) companies. Exempt from tax in the hands of the unitholder if distributed from SPV dividends that have been subject to Dividend Distribution Tax (pre-April 2020 DDT regime) or exempt under pass-through structure.
2. Interest component: Interest received from loans to SPVs and passed through to unitholders. Taxable as “Income from Other Sources” at the investor’s slab rate.
3. Capital gains component: From sale of assets within the REIT. Taxable as capital gains in the hands of unitholders.
4. Return of capital/principal repayment: Not taxable when received; reduces the cost of acquisition for future capital gains calculation.

The distribution breakdown is communicated by the REIT manager in the distribution notice. Investors must classify each component appropriately in their tax returns.

Tax treatment

Distributions

• Interest: Taxed at slab rate (no TDS for resident individuals if PAN is provided; 10% TDS otherwise).
• Dividend: Exempt from tax to the extent received from pre-2020 dividend distribution; otherwise taxed at slab rate.
• Return of capital: Not taxable; reduces cost base.

Capital gains on REIT unit sale

SEBI (REIT) Regulations classify REIT units as securities. Capital gains on REIT unit sales:

• Short-term (held less than 36 months): Taxed at 15% under Section 111A (treated as equity, as REIT units are listed securities attracting STT).
• Long-term (held 36 months or more): Taxed at 10% under Section 112A on gains above Rs 1 lakh.

Note: The holding period threshold for REIT units was clarified to 36 months (not 12 months as for equity) in older interpretations, but the Finance Act amendments progressively aligned REITs with equity treatment. Investors should verify the current applicable holding period under the latest CBDT guidance.

Distribution yield

REIT distribution yield is the annualised distribution as a percentage of the current market price. As of 2024, Indian office REITs typically offered distribution yields of 6% to 8% per annum, higher than comparable commercial real estate rental yields net of costs.

The yield is not fixed; it depends on lease renewals, occupancy rates, new asset acquisitions, and refinancing costs. Embassy REIT and Mindspace REIT have maintained consistent distributions supported by long-term lease agreements with multinational technology and financial services tenants.

Comparison with direct real estate

Comparison with InvITs

Infrastructure Investment Trusts (InvITs) are structurally similar to REITs but invest in infrastructure assets (roads, pipelines, power transmission) rather than real estate. Both are SEBI-regulated, exchange-traded, and distribution-focused.

References

1. SEBI (Real Estate Investment Trusts) Regulations, 2014, as amended.
2. SEBI Circular, Reduction of minimum investment in REITs and InvITs (2021).
3. Finance Act (applicable year), REIT distribution and capital gains tax provisions.
4. Income Tax Act, 1961, Sections 111A, 112A.
5. NSE, REIT listing and trading guidelines.
6. Embassy Office Parks REIT, Annual Report and Distribution Notices.