VMPL
New Delhi [India], May 14: Why institutional investors are turning to listed real estate and infrastructure trusts for liquidity, income resilience, and inflation protection.As India's real estate and infrastructure landscape undergoes a structural shift, institutional investors are rethinking how to access the sector with greater efficiency, transparency, and capital flexibility. At the forefront of this evolution are Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (INVITs)emerging as preferred instruments for those seeking steady income, liquidity, and protection from rising inflation.
"REITs and INVITs mark a fundamental redefinition of real estate exposure in institutional portfolios," says Dario Schiraldi, Deutsche Bank's former Managing Director and current CEO of VIDA Holding. "They provide structured access to income-generating assets while preserving the liquidity and transparency institutional investors require in a rapidly evolving macro environment."
The Emergence of REITs and INVITs in India
Overall, the traditional investment landscape in India was influenced by real estate assets and investments in assets through direct ownership, but this approach was very capital-consuming, illiquid, and very difficult to understand. REIT and INVIT structures were introduced by SEBI in 2014 and 2016, respectively and changed the direction of the investment landscape. These vehicles pool capital from multiple investors to acquire and manage revenue-generating assets such as office parks, logistics hubs, highways, and transmission lines, offering exposure to physical infrastructure in a liquid and regulated form.
These instruments are gaining strong traction among pension funds, insurance firms, and family offices seeking reliable cash flows and institutional-grade governance.
Why Are Institutional Investors Adopting REITs and INVITs?
1. Predictable Income and Inflation Resilience
REITs and INVITs typically invest in mature, income-generating assets with long-term contracts. Whether rental income from commercial real estate or toll revenue from expressways, these flows translate into stable distributions for unit holders. As leases and usage fees often contain inflation-linked clauses, investors benefit from real income protectioncritical in an environment where traditional fixed-income instruments face yield compression.
"In an inflationary world, REITs and INVITs provide yield continuity while helping preserve purchasing power," Dario Schiraldi, Deutsche Bank's former leader explains. "They're not just yield enhancersthey're portfolio stabilisers."
2. Liquidity and Transparency
REITs and INVITs, unlike direct property transactions, are all traded on stock exchanges and therefore can provide daily liquidity and price discovery. They are in a great position to offer both flexibility and accountability for institutions. Thanks to SEBI's regulatory oversight, you can count on the highest standards of governance, transparency, and independence when it comes to asset valuation.
3. Diversification and Scale
Investing in REITs and INVITs provides broad sector and geographic exposure, due to the pooling of a wide range of assets within a single trust, which mitigates concentration risk. They present a scalable solution for investors seeking large-scale real estate allocation without direct asset management burdens.
Market Performance and Momentum
As of 2024, India hosts three listed REITs: Embassy Office Parks, Mindspace Business Parks, and Brookfield India Real Estate Trust. These have consistently delivered 6-8% annual yields, supported by steady office leasing demand in key metros. On the infrastructure side, INVITs like IRB INVIT and India Grid Trust have proven that user-based modelstoll roads and power transmissioncan generate predictable long-term cash flows.
These vehicles are becoming core holdings for investors balancing long-duration liabilities or seeking alternatives to volatile equity and debt markets.
Key Considerations and Risks
Despite their appeal, REITs and INVITs are not risk-free. Unit prices remain susceptible to market sentiment and interest rate cycles. Asset quality, lease duration, and sponsor credibility must be carefully evaluated. Operational missteps or underperformance in underlying infrastructure projects can impair returns.
"Thorough due diligence remains essential," Dario Schiraldi cautions. "Institutional investors must assess both the quality of underlying assets and the governance standards of the managing entities."
A Strategic Asset Class for the Future
India's rapid urbanisation, digital economy expansion, and infrastructure pushdriven by programs like Gati Shaktiare setting the stage for exponential growth in tangible assets. REITs and INVITs offer an elegant solution for channelling long-term capital into these sectors while delivering liquidity, transparency, and consistent income.
"The Indian real estate market is at an inflexion point," Schiraldi concludes. "Organised investment structures like REITs and INVITs empower institutional investors to participate in India's growth story without sacrificing control, diversification, or governance. This is not just an evolutionit's a redefinition of real estate investing."
As India modernises its infrastructure and deepens its capital markets, REITs and INVITs are poised to play a central role in institutional portfolios. Investors seeking durable yield, regulatory clarity, and scalable access to tangible assets represent not just an opportunity, but a necessity in the next generation of portfolio strategy.
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