R
ohan Mehta, a 35‑year‑old IT professional from Bengaluru, invested ₹15 lakh in a real‑estate investment trust (REIT) to capture rental income without buying a property. Over the years he received steady dividends and modest capital gains, appreciating the simplicity, transparency and liquidity that REITs provide.

    SM REITs are designed for mature retail investors who seek a diversified real‑estate portfolio without the burden of direct ownership. They operate on the same principle as larger REITs: investors pool money to acquire and manage income‑generating assets such as offices, warehouses, shopping centres, logistics hubs and hospitals. The main difference lies in scale. Traditional REITs typically own assets worth more than ₹500 crore, whereas SM REITs focus on portfolios between ₹50 and ₹500 crore, making them more affordable for everyday investors. The minimum investment is ₹10 lakh.

    Regulated by SEBI, SM REITs must adhere to strict compliance and disclosure standards and are required to distribute most of their earnings, ensuring a regular income stream. Investors can expect yields in the 9–12 % range, offering stability and moderate returns suitable for those prioritising income over high‑growth development gains.

    However, SM REITs carry risks. Property‑value fluctuations can affect share prices, and as a relatively new asset class, long‑term performance remains uncertain. Risk‑averse investors may prefer other vehicles. Before investing, retail participants should conduct thorough due diligence: review financial statements, understand the investment strategy, assess the quality of the property portfolio, and evaluate the broader real‑estate market. Offer documents should be scrutinised for property details, projected yields and NAV disclosures.

    Liquidity is another consideration. Unlike mutual funds, which can be redeemed in one or two days, SM REIT units may take weeks or months to sell, and urgent sales often come at a discount, reducing realised returns. Tax treatment also differs: interest income is taxed at the slab rate, dividends are usually exempt, and amortisation is adjusted against capital gains. Equity mutual funds attract 12.5 % long‑term and 20 % short‑term capital‑gain tax, while debt funds are taxed at slab rates. Consequently, mutual funds often deliver higher post‑tax efficiency unless a steady rental income is the primary goal.

    In summary, SM REITs are best suited for experienced retail investors who want a 5–10 % allocation to real estate within a diversified portfolio, without the responsibilities of direct property ownership. They offer a convenient, transparent way to gain exposure to both commercial and residential markets, but investors must weigh liquidity constraints, tax implications and the inherent risks of a nascent asset class.