REITs and Mutual Funds - The Smarter Path to India’s Commercial Real Estate Opportunity!

Real Estate Investment Trusts (REITs) enable investors to participate in potential income-generating real estate – principally Grade-A office parks and premium retail assets – through units listed on the stock exchange. REITs own, operate and/or manage income or rent generating real estate assets. The REIT collects rent from its tenants and is required to distribute at least 90% of its cash flows to unitholders. Investors may thus receive rental income together with the potential for long-term capital appreciation, without owning, financing or managing property directly.

Recent regulatory developments have also benefited REITs as an asset class. REITs were reclassified as equity related instruments, effective Jan 1, 2026. Furthermore, they have become eligible for inclusion in equity indices, effective July 1, 2026. For example, select REITs will enter broad based Nifty equity indices effective Sep 30, 2026.

As the asset class continues to grow and evolve, we examine what REITs offer as an asset class and how investors can take exposure to them.

REITs exhibit characteristics of equities, bonds and of direct property ownership

While REITs benefit from contracted leases and regulated payout requirements, the underlying rental income is still subject to market conditions—tenant performance, occupancy cycles, and renewal dynamics can influence the actual cash flows available for distribution.

Real Estate Investment Trusts (REITs) enable investors to participate in potential income-generating real estate – principally Grade-A office parks and premium retail assets – through units listed on the stock exchange. REITs own, operate and/or manage income or rent generating real estate assets. The REIT collects rent from its tenants and is required to distribute at least 90% of its cash flows to unitholders. Investors may thus receive rental income together with the potential for long-term capital appreciation, without owning, financing or managing property directly.

Why take this exposure through the mutual fund route via an index fund?

An index fund offers easy access to the asset class, professional management, and diversification across the constituents of the index. From a tax perspective, income received from REITs by the MF Scheme is tax-exempt. Further tax is only levied on the MF Scheme NAV gains at the time of sale for Growth option. In view of the individual nature of tax consequences, each investor is advised to consult his/her own professional tax advisor.

The BSE REITs and Commercial Real Estate Index: a ~65%:35% split* between REITs and realty stocks

Source: BSE Index Services Pvt. Ltd. and internal calculations. * Based on the portfolio as on Aug 31, 2026. For detailed methodology, please visit www.bseindices.com

Source: BSE Index Services Pvt. Ltd. and internal calculations. As on Aug 31, 2026.

A single index thus provides investors exposure to India’s commercial real estate segment through 2 kinds of listed securities – REITs and listed developers whose revenues carry a meaningful rental component

The BSE REITS and Commercial Real Estate Index TRI has outperformed the BSE 500 TRI since inception~

Source: BSE Index Services Pvt. Ltd. and internal calculations. Data as of Aug 31, 2026. Return Risk Ratio = CAGR/Std. Deviation. Past performance may or may not be sustained in the future and is not a guarantee of any future returns. HDFC AMC/Mutual Fund is not guaranteeing or promising or forecasting any returns. *CAGR: Compounded Annual Growth Rate. ~Given the limited duration of the underlying dataset, any inferences drawn should be viewed as indicative.

^Sep 19, 2022 is the inception date for the BSE REITS and Commercial Real Estate Index TRI.

The BSE REITS and Commercial Real Estate Index TRI has also delivered this outperformance with lower volatility than the broad market. Its standard deviation has been below that of the BSE 500 TRI over the 1-year, 3-year and since-inception periods, giving a return-risk ratio of 1.29 since inception against 0.90 for the BSE 500 TRI. Additionally, the index has had a relatively low beta of 0.55 with the BSE 500 TRI.

Conclusion

REIT ecosystem is evolving into a mature, income oriented asset class, offering investors access to Grade A commercial real estate with regulated payouts and diversified exposure across high quality properties. REITs aim to provide investors a blend of stable rental income and potential capital appreciation, making them a distinct emerging asset class vs. equities and bonds. The BSE REITS and Commercial Real Estate Index provides access to this opportunity by combining a ~65%/35% mix of listed REITs and realty companies involved in commercial real estate.

The HDFC BSE REITS and Commercial Real Estate Index Fund offers investors convenient access to India’s commercial real estate as an investment asset class, combining the potential for income generation and long term capital appreciation through a diversified combination of REITs and realty companies.

The Scheme may be suitable for investors who seek exposure to commercial real estate without the associated ticket size or administration, wish to allocate beyond conventional equity and debt and can remain invested across a full property cycle – typically five years or longer. Investors seeking such exposure may consider investing in the HDFC BSE REITS and Commercial Real Estate Index Fund@. The Scheme will re-open on September 28, 2026.

The BSE REITS and Commercial Real Estate Index provides exposure to India’s commercial real estate segment through 2 kinds of listed securities – REITs and listed developers whose revenues carry a meaningful rental component, with a ~65%/35% split between REITs and realty stocks. The BSE REITS and Commercial Real Estate Index TRI has outperformed the BSE 500 TRI since inception, with a CAGR of 16.6% vs. 12.1%, while also delivering this outperformance with lower volatility than the broad market. The REIT ecosystem is evolving into a mature, income-oriented asset class, offering investors access to Grade-A commercial real estate with regulated payouts and diversified exposure across high-quality properties.

Dicionary term

Source: MFI360 Explorer, Morningstar, Bloomberg, internal calculations. Past performance may or may not be sustained in future and is not a guarantee of any future returns.
Disclaimer: The data/statistics is given for general information purposes only and is not an investment advice. Neither HDFC AMC / HDFC Mutual Fund nor any person connected with them, accept any liability arising from the use of this document. The recipient(s) before acting on any information herein should make his/her/their own investigation and seek appropriate professional advice. *Gold and Silver prices in INR do not include any customs duties, local taxes etc. Returns less than 1 year period are simple and greater than 1 year period are compounded annualized (CAGR). § Year to date. Σ Financial year to date.

Source: www.hdfcfund.com N.A. - Not Available. TER - Total Expense Ratio (As at last day of the month). Including Additional Expenses and Goods and Service Tax on Management Fees * Annualised tracking error is calculated based on daily returns for the last 12 months ^Investors in the Scheme shall bear the recurring expenses of the Scheme in addition to the expenses of other schemes in which this Fund of Funds scheme makes investment (subject to regulatory limits)
Disclaimer: The information/data herein alone are not sufficient and should not be used for the development or implementation of an investment strategy. The recipient(s) before acting on any information herein should make his/her/their own investigation and seek appropriate professional advice and shall alone be fully responsible/liable for any decision taken on the basis of information contained herein.
NSE Disclaimer: The above mentioned Schemes offered by HDFC Asset Management Company Limited (HDFC AMC) having benchmark as NSE Indices are not sponsored, endorsed, sold or promoted by NSE INDICES LIMITED (formerly known as India Index Services & Products Limited (IISL)). NSE INDICES LIMITED does not make any representation or warranty, express or implied (including warranties of merchantability or fitness for particular purpose or use) and disclaims all liability to the owners of the Products or any member of the public regarding the advisability of investing in securities generally or in the Products linked to the respective underlying indices of NSE to track general stock market performance in India. Please read the full Disclaimers in the Offer Document of the Products. BSE Disclaimer: The above mentioned schemes of HDFC AMC having benchmark as BSE Indices are based on the underlying indices of BSE. BSE® and SENSEX® are registered trademarks of BSELimited. The Schemes is not sponsored, endorsed marketed or promoted by BSE or their respective affiliates. Please refer to the Scheme Information Document for disclaimers.

 

Source: www.hdfcfund.com N.A. - Not Available. TER -Total Expense Ratio (As at last day of the month). Including Additional Expenses and Goods and Service Tax on Management Fees. 
∞The Schemes being an Exchange Traded Fund investing in a specific sector carries higher risks versus diversified equity mutual funds on account of concentration and sector specific risks. * Annualised tracking error is calculated based on daily returns for the last 12 months. And for schemes that have completed less than 12 months, Annualised Standard Deviation (tracking error) has been calculated based on the available data, i.e. since inception. Exit load does not apply on ETFs. ^ Margin available / haircut applied depends on broker.
Disclaimer: The information/data herein alone are not sufficient and should not be used for the development or implementation of an investment strategy. The recipient(s) before acting on any information herein should make his/her/their own investigation and seek appropriate professional advice and shall alone be fully responsible/liable for any decision taken on the basis of information contained herein. NSE Disclaimer: The above mentioned Schemes offered by HDFC Asset Management Company Limited (HDFC AMC) having benchmark as NSE Indices are not sponsored, endorsed, sold or promoted by NSE INDICES LIMITED (formerly known as India Index Services & Products Limited (IISL)). NSE INDICES LIMITED does not make any representation or warranty, express or implied (including warranties of merchantability or fitness for particular purpose or use) and disclaims all liability to the owners of the Products or any member of the public regarding the advisability of investing in securities generally or in the Products linked to the respective underlying indices of NSE to track general stock market performance in India. Please read the full Disclaimers in the Offer Document of the Products.
BSE Disclaimer: The above mentioned schemes of HDFC AMC having benchmark as BSE Indices are based on the underlying indices of BSE. BSE® and SENSEX® are registered trademarks of BSE Limited.
The Schemes is not sponsored, endorsed marketed or promoted by BSE or their respective affiliates. Please refer to the Scheme Information Document for disclaimers.

Riskometer as on August 31, 2026. For latest riskometer, investors may refer to the Monthly Portfolios disclosed on the website of the Fund viz. www.hdfcfund.com π Investors in the Scheme shall bear the recurring expenses of the Scheme in addition to the expenses of other schemes in which this Fund of Fund scheme makes investment (subject to regulatory limits).

Riskometer as on August 31, 2026. For latest riskometer, investors may refer to the Monthly Portfolios disclosed on the website of the Fund viz. <www.hdfcfund.com π Investors in the Scheme shall bear the recurring expenses of the Scheme in addition to the expenses of other schemes in which this Fund of Fund scheme makes investment (subject to regulatory limits).

NSE Disclaimer: The above mentioned Schemes offered by HDFC Asset Management Company Limited (HDFC AMC) having benchmark as NSE Indices are not sponsored, endorsed, sold or promoted by NSE INDICES LIMITED (formerly known as India Index Services & Products Limited (IISL)). NSE INDICES LIMITED does not make any representation or warranty, express or implied (including warranties of merchantability or fitness for particular purpose or use) and disclaims all liability to the owners of the Products or any member of the public regarding the advisability of investing in securities generally or in the Products linked to the respective underlying indices of NSE to track general stock market performance in India. Please read the full Disclaimers in the Offer Document of the Products.

BSE Disclaimer: The above mentioned schemes of HDFC AMC having benchmark as BSE Indices are based on the underlying indices of BSE. BSE® and SENSEX® are registered trademarks of BSE Limited. The Schemes is not sponsored, endorsed marketed or promoted by BSE or their respective affiliates. Please refer to the Scheme Information Document for disclaimers.

MSCI Disclaimer: HDFC Developed World Overseas Equity Passive FOF is not sponsored, endorsed, sold or promoted by MSCI. All MSCI indexes are owned by MSCI and provided as-is without any warranties. MSCI assumes no liability for or in connection with the MSCI indexes. Please refer the Scheme Information Document for complete disclaimer.

CRISIL Disclaimer and Copyright Notice : “© CRISIL Limited. All Rights Reserved Each CRISIL Index (including, for the avoidance of doubt, its values and constituents) is the sole property of CRISIL Limited (CRISIL). No CRISIL Index may be copied, retransmitted or redistributed in any manner. While CRISIL uses reasonable care in computing the CRISIL Indices and bases its calculation on data that it considers reliable, CRISIL does not warrant that any CRISIL Index is error-free, complete, adequate or without faults. Anyone accessing and/or using any part of the CRISIL Indices does so subject to the condition that: (a) CRISIL is not responsible for any errors, omissions or faults with respect to any CRISIL Index or for the results obtained from the use of any CRISIL Index; (b) CRISIL does not accept any liability (and expressly excludes all liability) arising from or relating to their use of any part of CRISIL Indices.

The views are based on internal data, publicly available information and other sources believed to be reliable. The statements contained herein are based on our current views and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Stocks/Sectors referred are illustrative and not recommended by HDFC Mutual Fund (“the Fund”)/ HDFC AMC. The Schemes of the Fund may or may not have any present or future positions in these sectors. It should not be construed as an investment advice or a research report or a recommendation by the Fund/HDFC AMC to buy or sell the stock or any other security covered under the respective sector/s. The Fund/ HDFCAMC is not guaranteeing any returns on investments made in the Scheme(s). Past performance may or may not be sustained in future and is not a guarantee of any future returns. HDFC Asset Management Company Limited (“HDFC AMC”) does not warrant the completeness or accuracy of the information herein. Neither HDFC AMC, nor any person connected with it, accepts any liability arising from the use of this material. The recipient(s) should before taking any decision, should make their own investigation and seek appropriate professional advice.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.