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REITs vs InvITs: Understanding the Difference Before You Invest
- Ripradaman R
- Feb 10
- 2 min read
Introduction
REITs and InvITs are popular income-generating investment vehicles in India.
Both offer regular cash flows and portfolio diversification.
However, their structure, risk profile, and return drivers differ significantly.
What Are REITs
REITs invest primarily in income-generating real estate assets.
Core characteristics:
Commercial properties like offices, malls, business parks
Rental income as the main cash-flow source
Mandatory distribution of a large portion of earnings
REITs benefit from stable occupancy and rental growth.
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What Are InvITs
InvITs invest in infrastructure assets with long-term cash flows.
Key features:
Roads, power transmission, pipelines, renewable assets
Revenue from usage charges or long-term contracts
Predictable but regulated income streams
InvITs are designed for infrastructure monetisation.
Key Differences Between REITs and InvITs
While both are listed trusts, their fundamentals differ.
Major differences:
Assets: Real estate vs infrastructure
Revenue: Rent-based vs usage/contract-based
Growth drivers: Property cycles vs economic and regulatory factors
Risk: Market-driven vs policy and operational risk
Understanding asset nature is critical.
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Returns and Income Stability
Both instruments aim to deliver steady income.
Comparison insights:
REITs offer moderate growth with rental escalation
InvITs offer stable yields with limited growth upside
InvIT cash flows are often more predictable
Return expectations should match income needs.
Taxation Differences
Tax treatment varies across components.
Key points:
Interest income is taxable in the hands of investors
Dividend taxation depends on trust structure
Capital gains tax applies on sale of units
Tax efficiency differs across individual trusts.
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Which One Should You Choose
Choice depends on investor profile.
General guidance:
Income + growth → REITs
Stable yield + lower volatility → InvITs
Conservative investors → Prefer diversified trusts
Asset allocation matters more than selection alone.
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Conclusion
REITs and InvITs serve different investment objectives.
REITs suit investors seeking income with growth potential.
InvITs suit those prioritising predictable, long-term cash flows.
FAQ
Q1. Are REITs riskier than InvITs?
REITs are more sensitive to real estate cycles, while InvITs face regulatory risks.
Q2. Do REITs and InvITs give regular income?
Yes, both are mandated to distribute a major portion of cash flows.
Q3. Which offers better returns?
REITs may offer higher long-term returns, InvITs offer more stability.
Q4. Can retail investors invest in both?
Yes, both are listed and accessible to retail investors.
Q5. Are REITs and InvITs good for diversification?
Yes, they add income stability and reduce equity portfolio volatility.
Citations
Securities and Exchange Board of India (SEBI)
National Stock Exchange of India (NSE)
Ministry of Finance, Government of India
Real Estate and Infrastructure Industry Reports
Bloomberg Market Insights
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