India's REIT Market Reaches $18 Billion Milestone, Regulatory Reforms Set to Drive Future Growth

India's Real Estate Investment Trust (REIT) market has reached a significant milestone in 2025 with its fifth listing, marking a transformative period supported by regulatory reforms and growing investor interest. The market has evolved from questions about scalability to discussions about the pace of future growth, positioning India as an emerging player in the global REIT landscape.

Market Structure and Current Position

India's REIT market, which began its journey in 2014, now comprises five listed trusts that collectively hold a market capitalisation of approximately $18 billion. These REITs function similarly to mutual funds but focus on income-generating real estate assets including offices, malls, and warehouses.

While this represents meaningful progress for the domestic market, India's REIT sector remains relatively small compared to global peers. The United States leads with 196 listed trusts and a market capitalisation of $1.4 trillion, followed by Japan with 57 REITs, Singapore with 39, and Australia with 32.

Regulatory Reforms and Investment Potential

A major catalyst for future growth lies in regulatory reforms scheduled to take effect from January 2026. These changes will reclassify REITs as equities, aligning India's framework more closely with global standards and potentially unlocking substantial institutional investment.

Currently, mutual funds have invested only around ₹23,000 crore in REITs, representing less than 1% of their net asset value despite being permitted to allocate up to 10%. The upcoming reclassification is expected to encourage equity funds to increase their allocations, improve market liquidity, and help establish REITs as a mainstream asset class.

The sector also benefits from favorable tax treatment, with dividends and rental income exempt for investors provided the underlying special purpose vehicles pay corporate tax. Earlier reforms in 2024 reduced the holding period for capital gains from 36 months to 12 months, providing additional momentum.

Performance Metrics and Market Activity

Indian REITs have demonstrated strong performance relative to global benchmarks, according to data from Anarock. The sector faces some operational challenges, with vacancy levels remaining in the 10-16% range, but underlying market activity continues to show strength.

As of October 2025, over 23 million square feet of new Grade A office space was under construction. Global Capability Centres have emerged as a significant demand driver, accounting for 28-29% of gross leasing activity and reinforcing India's position as a global office hub.

Future Growth Prospects

The market is projected to surpass $30 billion in the coming years, with additional momentum expected from the introduction of Small and Medium REITs (SM REITs). This new segment will enable fractional ownership of properties valued between ₹50 crore and ₹500 crore.

CBRE estimates that the SM REIT segment alone could grow to over $75 billion, encompassing nearly 500 million square feet of eligible commercial assets across offices, retail, and logistics sectors. This expansion would significantly broaden the market's reach and provide investors with access to a wider range of real estate investment opportunities.