Real Estate Investment Trusts (REITs) are experiencing increasing investor interest due to their relatively high dividend yields and equity-like tax treatment. According to reports from Edelweiss Mutual Fund, mutual funds are showing growing appetite for this asset class, with some schemes increasing REIT exposure in recent months. Two fund houses have now introduced REIT-focused offerings: Edelweiss Nifty REITs & Realty Index Fund with minimum 60% REIT exposure and WhiteOak Capital Dividend Yield Fund with up to 70% assets in REITs and InVITs. However, as Edelweiss Mutual Fund's MD & CEO Radhika Gupta emphasized, "Too many investors still think of REITs as fixed income. They aren't. They're an equity asset class with cash flow-generating real estate underneath."
Despite their income-generating characteristics, REITs carry significant market risk. As reported by Edelweiss Mutual Fund, equity market volatility in India typically ranges 14-16%, while pure-play REIT index volatility is roughly 10-11%, which is lower than equities but still substantially higher than fixed income instruments. Globally, listed REITs have behaved more like equities than bonds with a long-term beta of around 0.6-0.7 versus broad equity markets. The fund's proposed construct has an expected volatility of around 13%, only modestly higher than the REIT index. Vaibhav Porwal, Co-founder of Dezerv, explains that "Debt has three defining features: a fixed maturity, a promised coupon, and repayment of principal. A REIT has none of them."
According to Edelweiss Mutual Fund's Managing Director and CEO Radhika Gupta, REITs differ from equities in return sources, with REIT yields typically around 5-6%, materially higher than broader equity market dividend yields. A larger share of REIT returns comes from regular income and cash flows, whereas equities rely more heavily on earnings growth. Gupta emphasized that "A larger share of REIT returns comes from regular income and cash flows, whereas equities rely more heavily on earnings growth." Porwal notes that "REITs are primarily driven by occupancy, rental growth, interest rates and commercial property cycles, while equities largely track corporate earnings and valuation multiples."
As reported by Edelweiss Mutual Fund, SEBI classifies REITs as equity instruments due to their market-linked nature and volatility characteristics. The investment case for REITs is similar to adding Gold ETFs or other real assets to a portfolio, bringing exposure to different underlying assets rather than serving as a replacement for bonds. Porwal explains that "SEBI's November 2025 circular recognised this. From 1 January 2026, REIT investments by mutual funds and SIFs have been treated as equity-related instruments. From 1 July 2026, REITs became eligible for inclusion in equity indices." He notes that "SEBI is not claiming a REIT is identical to a stock. It is placing it in the right risk family."
