How REITs are redefining wealth creation for India's middle class

Time of India

13-07-2025

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Why it is more urgent now than ever to have tools for inclusive wealth creation
Five lesser-known benefits of REITs
Protection against Inflation: REIT leases have built-in rental escalations (typically 5% annually) providing a powerful hedge against inflation over time
Tax efficiency: REITs are highly tax-efficient, as they avoid double taxation at the corporate level and the dividend component of the distributions is tax-free in the hands of investors.
Governance: REITs are governed under strict SEBI Regulations. The governance includes independent trustees, ring-fencing assets, ceiling on debt levels, investment only in rent generating assets, distribution of 90% of income and various other regulations regarding Related Party Transactions, investments, disclosures etc, making REITs a highly secure product.
SIP: REITs also allow investments through Systematic Investment Plans (SIPs) on various platforms, helping investors build wealth over time through regular contributions and the benefits of rupee-cost averaging
Urbane Growth Market Investments: REITs will benefit from India's urban infrastructure boom - driven by growing demand for warehouses (fueled by e-commerce), Grade-A office spaces (led by Global Capability Centers), and retail (spurred by rising consumption)
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India's rapid economic rise is undeniable, but the mechanisms of wealth creation have still been exclusive in nature for most and have been a domain of the privileged few. However, they are now being shaped by the growing resilience and aspirations of the middle class The creation of wealth has become a priority for both the individual and the nation. Rising disposable incomes along with better financial awareness and hunger for smarter investments are driving this transformation. While India adds nearly three people to the ultra-high net worth bracket every day, the growing middle class (expected to reach one billion by 2030) is now beginning to participate in opportunities traditionally accessed by institutional grade real estate investors.In the past, if you wanted to own a commercial property, you needed huge capital, which was available to the ultra-wealthy and others couldn't even dare think. Now, the Real Estate Investment Trust (REIT) structures are democratizing investment in commercial real estate by making it accessible to even those with modest amounts to invest and converting an exclusive wealth building asset class into an inclusive one.A REIT is a company that owns and operates income-generating real estate assets such as offices and malls, and must pay out 90% of cash flows semi-annually, and have 80% of their portfolios invested in rent generating assets. REITs allow individuals to buy units on the stock exchange, enabling them to invest in large-scale commercial real estate without having to directly own or manage properties.India's middle class stands at a pivotal moment—adapting to changing market conditions, moderate salary growth, and the impact of inflation on long-term savings. While traditional instruments like fixed deposits, yielding 6–7%, continue to offer safety and stability, they may not always meet the aspirations of an increasingly financially aware and upwardly mobile generation.Direct ownership in real estate, though attractive, often remains out of reach of many due to high entry costs, illiquidity, and regulatory hurdles. This is where the opportunity lies, for capital and innovation to come together and open up newer, safer, more accessible and liquid investment avenues.In historical terms, income-generating commercial real estate (CRE) was generally the preserve of institutional and also ultra-wealthy investors. With the introduction of REITs, India's middle class can shift from owning only homes to owning other income-generating commercial real estate assets like malls, hotels, warehouses etc. REITs have unlocked access to a once-exclusive asset class, allowing India's growing middle class to participate in the wealth-building potential of commercial real estate.Unlike traditional fixed deposits (FDs), REITs offer a more attractive combination of higher returns, regular income through distributions, capital appreciation, and liquidity, while still maintaining a strong safety profile.For middle-class investors seeking a balance between stability and growth, REITs present an ideal entry point into modern investment options. They combine the reassurance of tangible assets with the flexibility and diversification typically associated with financial instruments, aligning well with the evolving financial goals of middle-income households.As India moves towards becoming a $5 trillion economy, financial inclusion is critical. In this context, REITs are not just another investment vehicle, they are enablers of economic empowerment. By bridging the gap between aspiration and accessibility, REITs are redefining how India's middle class builds wealth.For millions of Indians looking to move beyond FDs and fixed-income instruments, they are fast becoming the smarter, safer, and more sustainable choice for wealth creation.The REIT revolution is here and it's changing how Indian investors build wealth. – One unit at a time.(The author, Abhishek Agrawal is the Chief Financial Officer at Embassy Office Parks REIT)(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)