Final Brief: Why Most Indian REITs Deserve Deep Skepticism
“Wealth is the slave of a wise man, the master of a fool.” — Seneca
Amid the hunt for passive income, REITs seem like a perfect compromise: exposure to real estate without the hassle of owning it. But in practice, they often represent the worst of both worlds — low return, high tax drag, and equity-like volatility.
More importantly: they are not designed for wealth creation.
They are designed as exit vehicles — elegant financial structures that allow developers and institutional sponsors to offload stabilized assets after capturing the real upside.
🧠 Who Are REITs Really For?
Let’s be brutally honest:
- The sponsor builds, leases, and stabilizes assets at low cost.
- They enjoy capital appreciation — land, development, early lease-up.
- Then they sell the asset to the REIT, and you buy the yield.
- Over time, the asset depreciates, lease growth slows, and maintenance costs rise.
This is not a wealth strategy — it’s a yield trap for late entrants.
The average investor becomes what I call an exposure chaser:
Scared of equities, overwhelmed by real estate, seduced by the packaging.
📊 Real Returns Tell the Story
- The Nifty REITs & InvITs Index has delivered ~3% CAGR since 2019, with modest capital gains and <2% dividend yield.
- Meanwhile, the BSE Realty Index (actual real estate companies) is up 317% over the same period.
- Nexus Select is a rare exception, but even that is better viewed as a mall operator with retail arbitrage than a pure REIT story.
In short: the returns go to the builder, not the buyer.
🧱 My Philosophy: Buy SqFt, Sell Yield
As an investor, I don’t buy REITs. I build what REITs are made of.
I buy square feet — directly, at the asset level.
I clean up titles, lease it, and then sell the yield to others — family offices, HNIs, and institutions who want 8–10% with “safety.”
That’s where real wealth is made:
- Take calculated risk when others won’t.
- Capture the arbitrage.
- Exit to those who want “peace of mind.”
REITs flip that model: you pay full price, accept all future risk, and forgo control.
✅ So, How Should You Evaluate a REIT?
| Question | What to Look For |
|---|---|
| Who built the assets? | Did the sponsor already cash out? |
| Who manages them now? | Are there related-party conflicts? |
| What is the true source of yield? | Rental income vs. interest vs. amortization |
| Can they grow NAV? | Without dilution or unsustainable leverage |
| Is this buying optionality or offloading certainty? | Be honest: are you being sold a story, or a terminal asset? |
🧭 A Stoic Investor’s Path
“Do not seek to be lucky. Seek to be prepared when others are not.”
If you want real estate exposure:
- Buy directly.
- Partner in early-stage deals.
- Look for distress, not polish.
If you want income:
- Look beyond REITs — explore direct leasebacks, high-quality bonds, or dividend-yielding stocks with reinvestment optionality.
If you still want REITs:
- Study them like utilities, not growth instruments.
- Look for governance, lease duration, and tenant stickiness — and prepare for tax drag.
🎯 Final Word
REITs aren’t evil — they’re just designed for someone else’s benefit. And unless you know exactly what you’re doing, you’re not the beneficiary.
Don’t buy what the smart money is selling.
Be the smart money — build, lease, package, and sell.
“This brief is for educational purposes, not investment advice.”
Ref: https://www.niftyindices.com/Factsheet/Factsheet_REITs_InvITs.pdf