28th April 2025 (15 Topics)
REITs and InVITs
Context
REITs and InVITs offer retail investors an opportunity to invest in large infrastructure and real estate projects in India, previously accessible only to institutional players, democratizing access to high-value assets with lower capital requirements.
What are REITs?
- Real Estate Investment Trusts (REITs) allow to invest in real estate without physically owning it.
- They work like mutual funds, pooling money from various investors to buy properties.
- The income from these properties (through rent or property sales) is then distributed to investors in the form of dividends.
- Here, income is generated through rents or capital gains.
- Dividends are paid to investors based on the units they own.
- REITs are regulated by the SEBI (Real Estate Investment Trusts) Regulations of 2014.
What are InVITs?
- Infrastructure Investment Trusts (InVITs) let retail investors invest in large infrastructure projects, which were previously accessible only to institutional investors.
- By investing in InVITs, one can get steady income from dividends and potential long-term capital appreciation as the economy grows.
- Income is received from infrastructure projects (toll plazas, highways, energy projects).
- Capital Appreciation is possible as the economy grows.
- InVITs fall under the purview of the SEBI (Infrastructure Investment Trusts) Regulations, 2014.
Key-Difference |
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REITs |
InVITs |
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Asset Type |
Focus on real estate assets such as commercial properties, malls, and residential buildings. |
Invest in infrastructure assets like toll roads, power plants, and pipelines. |
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Income Generation |
Earn income through rents from properties |
Earn income through usage fees, tolls, or tariffs from infrastructure projects. |
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Risk Profile |
Generally less risky because they focus on diversified property portfolios that generate stable rental income. |
Can carry higher risk due to operational and regulatory challenges inherent in infrastructure projects. |
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Liquidity |
Are traded on stock exchanges, providing higher liquidity. |
Are also listed but may have lower liquidity than REITs due to the nature of infrastructure assets. |
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Regulation |
Both REITs and InVITs are regulated by SEBI but under different regulations (REITs Regulations 2014 for REITs and InVITs Regulations 2014 for InVITs). |
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