In just six years, India’s Real Estate Investment Trust (REIT) sector has evolved from a policy experiment into a mainstream asset class commanding a gross asset value (GAV) of Rs 2.3 lakh crore. According to report ‘India REITs - Taking a Stride" by ANAROCK Capital, the sector’s equity market capitalisation reached ~INR 1.66 lakh crore as of September 30, 2025 — a scale that now exceeds the Hong Kong REIT market, despite only ~32% of India’s REIT-worthy stock currently being listed.

With the recent listing of Knowledge Realty Trust in August 2025, five listed trusts now control ~176 million sq ft of Grade-A office and retail space alongside a 2,000 plus-key hospitality platform.

From Niche to Mainstream

Vishal Singh, MD - Investment Banking, ANAROCK Capital, says, "Since the first listing in 2019, the sector has expanded rapidly with Embassy, Mindspace, Brookfield India, Nexus, and now Knowledge Realty Trust — India’s largest office REIT by GAV and NOI. These platforms span Bengaluru, NCR, MMR, Hyderabad, Pune, Chennai, and key tier-II hubs, offering investors diversified exposure to India’s technology, BFSI, consulting, and retail corridors. Alongside, REIT distributions are tax efficient through a mix of dividend, interest and return of capital, with current distributions offering upwards of 65% tax-exempt income in the hands of unitholders."

The mandatory distribution of at least 90% of net distributable cash flows has successfully transformed these trusts into efficient yield vehicles, democratizing access to Grade-A commercial real estate for HNIs and retail investors without the opacity or illiquidity of direct property ownership.

ROI: Dual-Engine of Income and Growth

"The Q2 FY26 scorecard underscores a powerful total-return proposition that has proven remarkably resilient to rate hikes and market volatility," says Shobhit Agarwal, CEO - ANAROCK Capital. "Since listing, unit prices for the initial four REITs have surged between 25% and 61%, while the newly listed Knowledge REIT has already gained approximately 12%. This capital appreciation is complemented by steady income generation, with trailing 12-month distribution yields holding firm in an attractive 5.1–6.0% band. In the second quarter of FY26 alone, the five REITs distributed over INR 2,331 crore — a massive ~70% year-on-year growth driven by occupancy upticks, new asset additions and listing of Knowledge REIT."

Crucially, Indian REITs indices have delivered a five-year annualised price return of roughly +8.9%, significantly outperforming peers in Singapore, Japan, and Hong Kong, many of which have languished with negative or low-single-digit returns during the same period.

90% Plus Occupancy & Blue-Chip Stability

Portfolios are running near optimal capacity with committed occupancies ranging from 90–96%. The sector accounted for over 20% of all pan-India gross office leasing in Q2 FY26, with Embassy and Knowledge alone leasing ~2.5 million sq ft.

Robust Growth Outlook

• Re-leasing Spreads: Strong spreads of 20–36%.
• Mark-to-Market Upside: An estimated ~15–24% upside on in-place rents, securing visible Net Operating Income (NOI) growth for the next 3–4 years.
• Fortress Balance Sheets with AAA Ratings: The sector is underpinned by prudent financial management. All five REITs maintain AAA credit ratings from CRISIL and operate with conservative leverage (loan-to-value) of 18–31%.
• Low Debt Costs: Average debt cost stands at ~7.4–7.5%.
• Healthy Coverage: Interest-coverage ratios range between 2.2x and 4.0x.
• Long Maturity: With only ~38% of debt maturing over the next 4 years, bulk of the borrowings is backed by long term repayment tenures.

ESG: Global Top Decile Performance

Indian REITs have established themselves as global sustainability leaders. All five entities hold GRESB 5-Star ratings, with scores in the low-to-mid 90s.

• Renewable Energy: Currently powers 38–74% of portfolio consumption.
• Net-Zero: Commitments range from 2030 (Nexus) to the early 2040s.

Also Read: REIT Penetration in Office Market can Reach 25-30% by 2030: Colliers India

Equity Reclassification a Game-Changer

A pivotal regulatory shift will unlock the next wave of capital. In November 2025, SEBI reclassified REIT units as 'equity-related instruments effective January 1, 2026. This shifts REIT exposure from debt/hybrid sleeves to mainstream equity buckets, enables index inclusion starting mid-2026, and allows higher allocation limits for mutual funds, significantly broadening the domestic capital base.

As 2026 approaches, the Indian REIT landscape stands on the brink of a quantum leap.

"With SEBI’s pivotal reclassification taking effect in January, these trusts are poised to graduate from high-yield alternatives to essential equity portfolio staples," says Vishal Singh. "Fuelled by impending index inclusion and deepening domestic participation, the sector is on track to breach a USD 20 billion market cap in the near term."

This evolution marks more than just a real estate recovery — it signals the rise of a structural powerhouse that will define the next decade of India’s capital markets, offering investors a rare blend of stability, sustainability, and soaring growth.