Should you buy REITs when multibagger realty stocks seem unstoppable?

"These regulations have lowered entry barriers, making it easier for retail investors to participate in the real estate market with smaller investment amounts. The increased accessibility has democratised real estate investment, attracting a broader investor base and enhancing market liquidity," Expert Aryaman Vir, CEO at WiseX said, adding that post the amendments, there has been a surge in enquiries from potential investors interested in fractional ownership opportunities.

Not just this, office REITs witnessed decent traction in gross leasing in the quarter ended March 31, 2024 indicating a healthy office demand trend. Occupancy for most REITs improved in Q4FY24 with further buoyancy expected in FY25, Nuvama said in a note. The brokerage remains sanguine about prospects for REITs on improving demand environment and the likelihood of interest rate cut as it retains its ‘Buy’ view on all REITs.

Currently, there are four listed REITs in India viz. , , and .

Brookfield India REITs has seen its share price erode by 4.38% over the last 1-year while witnessing a reversal this year so far. Its year-to-date returns stand at 8%. As for Embassy Office Parks REIT, 1-year returns stand at 17% while the YTD returns at 8%. It was listed on April 1, 2019. Mindspace Business Parks REIT has delivered returns of over 8% and 4% in 1-year and YTD periods.

Meanwhile, Nexus Select has been on a losing side in 2024 so far with negative returns of over 4%. On a 1-year basis, they stand at 21%.


On the other hand, realty stocks have had a great run on the exchanges over the past 12 months. Out of the 10 Nifty Realty index stocks, five have given multibagger returns during this period viz. , , , and The Phoenix Mills.

Others including , 17, 87, , 31, 97, , 17%, 72%, , 41, 47 and have yielded between 26% and 87%.


The performance of individual stocks have also helped Nifty Realty index gain 117% in the one-year period.

Vir calls it unfair to compare real estate stocks and REITs in terms of returns as the latter possesses distinct nature and investment characteristics. While real estate stocks are often tied to individual companies and their performance, REITs are diversified portfolios of income-producing real estate assets, he said.

Vir further said that stocks can be more volatile and react quickly to market conditions, whereas REITs provide more stable, long-term income through dividends, he opines. “REITs offer investors diversification benefits and are designed to be less correlated with the stock markets,” the WiseX CEO said.

Vir said that the Indian real estate market is booming and the sector that was valued at $265 billion in 2023 is now projected to reach $1 trillion by 2030 and $5.8 trillion by 2047.

This growth presents an opportune moment to leverage the benefits of real estate investments, whether through stocks or REITs, he opined.

REITs as an investment option

REITs hold significant potential as an investment option due to their ability to provide steady income through dividends, portfolio diversification, and exposure to real estate markets without direct property ownership.

Vir said that REITs become more attractive when interest rates are low because they offer higher yields compared to traditional fixed-income securities like savings accounts, FDs and government bonds.

While REITS are relatively safer investment instruments, choosing between realty stocks and REITs will depend upon the risk tolerance of investors, his investment goals and the market outlook.

“Realty stocks might be suitable for those seeking higher growth potential and willing to accept higher volatility. In contrast, REITs could be ideal for investors looking for stable income and diversification with lower risk,” Vir added.
For this analyst striking a balance through diversification works.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)