Policy consistency to increase investor confidence
For a country that aims to become a developed economy by 2047, REITs could play a crucial role in attracting investments into the Indian real estate sector and provide developers with a sustainable financing option to fuel future growth. In view of this, it is important that REITs gain popularity among both investors and real estate developers, increasing the depth and breadth of the Indian REIT market. Despite the continued efforts of the Securities and Exchange Board of India (SEBI) in implementing reforms, key opportunities that can accelerate REIT adoption should be tapped in the Union Budget 2026. From a real estate developer’s perspective, uniformity in stamp duty structures across states and further reduction in regulatory overlap between SEBI and the Real Estate (Regulation and Development) Act (RERA) could lead to more REIT listings in 2026 and afterwards. Similarly, bridging the gap that currently exists between REIT guidelines and the Special Economic Zone (SEZ) framework could bring high-quality assets under the REIT umbrella. These steps could not only ensure inclusion of a greater number of real estate assets such as warehouses, Global Capability Centers (GCCs), industrial parks, etc., into REITs, but also boost investor confidence as India looks to scale up its REIT market.
Tax stability and treatment to encourage long-term investment
From the perspective of institutional and retail investors, it is imperative that India refines the tax framework to simplify the tax treatment of all components of REIT distributions. This includes dividends, capital repayments, interest charges and the like; ensure that tax treatment is aligned to attract long-term investors. First, expanding tax-free dividend distributions to all REITs, regardless of the chosen tax regime, could provide greater uniformity and increase the supply of REIT listings. The tax on REIT interest paid to an FPI will be capped at 5% to boost after-tax returns, broaden the global investor base and channel stable, long-horizon capital into India’s listed real estate platforms. Similarly, further rationalization of GST rates on input materials and services could reduce cost pressures for developers, while fiscal policy interventions aimed at encouraging participation of long-term funds and pension funds could deepen the Indian REIT market. Thus, REIT investors and the real estate sector in general would like to see a more stable tax environment, along with a range of fiscal measures to increase market depth in the coming fiscal.
Improving liquidity and accelerating REIT adoption
Given that India currently has only five listed REITs, it is prudent for the Indian government to implement significant reforms aimed at encouraging new listings and accelerating investor adoption. While tax incentives, policy reforms and repo rate cuts have supported the Indian REIT story so far, more structural measures are needed to attract greater liquidity and large-scale participation from retail investors. Investor education initiatives that emphasize how REITs can function as stable income-generating assets even in an external high-inflation environment could strengthen retail participation; even as the entry of small and medium-sized REITs (SME REITs) could expand India’s approximately ₹1.66 lakh crore REIT market by leaps and bounds in the near future. With SEBI already classifying RET units as equity-linked instruments from January 1, 2026, the combination of increased participation in mutual funds and any positive momentum brought about by the Union Budget could unlock significant growth opportunities for the entire real estate ecosystem.
(The author is Chairman and MD of Nisus Finance)
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