Edelweiss Mutual Fund has launched India's first REIT-oriented index fund, marking a significant milestone in the country's real estate investment trust market. The fund, which opens for subscription from August 5th to 19th, 2026, tracks the Nifty REITs & Realty Total Return Index and provides investors with diversified exposure to the listed real estate sector. According to Mint, MD & CEO Radhika Gupta explained that the scheme excludes InvITs due to current SEBI regulations that do not allow passive funds to combine equity-classified REITs with hybrid-classified InvITs. This development comes as India's Reit and InvIT market continues to expand significantly.
The Nifty REITs and Realty Index has demonstrated strong performance with a 5.03% total return over the last one year, 19.10% CAGR in the last three years, and 17.58% CAGR since its inception on July 1, 2021. As per Mint, the index provides a 3.35% dividend yield and is reconstituted and rebalanced quarterly. Individual REITs have delivered impressive returns ranging from 8% to 19% over the past year, though investors require expertise to select individual REITs. In India, there are currently only six listed REITs with a ₹2.1 lakh crore market capitalisation, compared to 196 listed REITs in the US with ₹1.42 trillion market capitalisation. The six listed REITs in India own commercial properties worth ₹3.1 lakh crore Gross Asset Value, representing a 32% discount to their market capitalisation.
As reported by Mint, the shift reflects growing interest from institutional and retail investors seeking exposure to these asset classes. Ashwin Patni, head of wealth management solutions at Julius Baer, noted that this structure where funds invest in Reits and InvITs is a six-to-12-month phenomenon, with direct client interest driving fund manager exploration of these products. According to Shajikumar Devakar, co-founder of Neo Group, the timing reflects the evolution of the asset class where investors can now build diversified portfolios across sectors, sponsors, and infrastructure themes. The demand is particularly strong from family offices looking beyond conventional equity and fixed-income investments for assets capable of generating regular cash flows.
Radhika Gupta, MD & CEO of Edelweiss Mutual Fund, addressed investor queries about the fund's structure on social media platform X, explaining that REITs are classified as equity instruments while InvITs are treated as hybrid instruments. She noted that combining the two would change the product's nature from an equity index fund to a hybrid index fund, which is currently not permitted under SEBI's regulations for passive funds. The fund's composition reflects this regulatory framework, with nearly 60% allocation to Indian REITs and 40% to realty stocks in the underlying index. Gupta highlighted that the fund's 15% limits are designed to prevent single security concentration, while the volatility is just a little higher than a pure REIT fund and much lower than a pure real estate fund. The index has been designed to gradually increase REIT allocation as more REITs get listed in India, with potential for the fund to become predominantly or entirely invested in REITs over time.
Real estate investment trusts (Reits) own and manage income-generating commercial real estate assets such as office parks, retail malls, and warehouses, generating revenue primarily through rent collected from tenants. Infrastructure investment trusts (InvITs) follow a similar structure but invest in infrastructure assets including roads, power transmission lines, telecom towers, and pipelines, generating revenue through tolls, tariffs, usage charges, and long-term project contracts. Both REITs and InvITs are listed on Indian stock exchanges and trade as units, with under SEBI regulations, they are generally required to distribute at least 90% of their net distributable cash flows to unitholders. According to Gupta, the fund aims to mirror the returns of Nifty REITs & Realty Total Return Index, subject to tracking error, with the index designed to gradually increase REIT allocation as more REITs get listed in India. A key advantage of the mutual fund structure is that distributions from underlying REITs can compound within the fund instead of being taxed immediately as regular payouts, potentially making the investment more tax-efficient for long-term investors. The fund addresses long-standing challenges associated with direct real estate investment, including high capital requirements, illiquidity and concentration risk.
