REITs Gain Attention From Mutual Funds As Fund Houses Expand Offerings

The real estate investment trusts (REITs) mutual funds segment is gaining traction, with Navi Mutual Fund announcing a REIT-focused index fund and Motilal Oswal Mutual Fund and HDFC Mutual Fund filing documents for three new products.

According to the Securities and Exchange Board of India (SEBI) filings, Motilal Oswal has filed for the Motilal Oswal Nifty REITs & Realty Index Fund and an exchange-traded fund (ETF), while HDFC Mutual Fund plans to launch the HDFC BSE REITs and Commercial Real Estate Index Fund.

Edelweiss Mutual Fund has already launched a Nifty REITs & Realty Index Fund. WhiteOak Capital Mutual Fund has added REITs and infrastructure investment trusts (InvITs) to its Dividend Yield Fund.

Growing REIT Market Creates Scope For More Fund Offerings

India’s combined REIT and InvIT market is estimated at nearly ₹10 trillion, according to an Avendus sector outlook. The market could exceed ₹20 trillion by 2030 and may require an additional ₹11.6 trillion of capital, with mutual funds expected to contribute around ₹4.5 trillion.

The immediate mutual fund focus is largely on REITs rather than InvITs. Several new products are also using indices that combine listed REITs with real estate companies, partly because the number of listed REITs remains limited.

Regulatory Change Has Made REITs More Accessible To Funds

A key change for REITs came on 1 January 2026. SEBI reclassified mutual fund and specialised investment fund (SIF) investments in REITs as equity-related instruments. Meanwhile, InvITs continue to be treated as hybrid instruments.

REITs were also allowed to enter equity indices from 1 July 2026.

However, regulatory limits remain important. A 10% single-security cap and the limited number of large listed REITs make it difficult to build a fully active, dedicated REIT fund.

REIT Income Appeal Comes With Market And Asset Risks

REITs offer exposure to income-generating commercial properties, including pre-leased offices, data centres and global capability centres. REIT yields are generally around 5-6%, but distributions are not fixed returns.

Interest rates, valuations, occupancy, leverage and underlying cash flows can affect returns. Office REITs also remain exposed to any meaningful slowdown in leasing demand.

For investors, the expansion of REIT mutual funds provides another route to listed real assets. Whether these products become a mainstream mutual fund category will depend on the growth of the listed REIT universe, valuations and the sustainability of underlying cash flows.

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