REITs & InvITs Explained: A Guide for Foreign Investors in Indian Real Estate

India continues to be a lucrative destination for investing in real estate, whether residential, commercial, office, or industrial. Opportunities are plentiful. Nevertheless, regulatory frameworks, fragmented laws, and high taxation structures have historically made foreign investors wary of entering the Indian real estate. The GIFT City IFSC has changed this perception with transparent and internationally compatible offerings. Investing in structured, regulated, and tax-efficient real estate offerings is now accessible for non-residents interested in investing in Indian real estate.  

Reasons for Investing in Indian Real Estate  

India is witnessing phenomenal growth in multiple sectors, primarily in the economy, urban development, and government real estate policies. Some of the most significant benefits of investing in Indian real estate are:  

1. Excellent Capital Returns  

With commercial real estate in the key metropolitan cities of Mumbai, Bengaluru, and NCR Delhi returning 6-10% annually, Indian real estate is a strategic purchase for foreign wealth. Furthermore, residential real estate in Tier-1 and even Tier-2 cities is providing strong returns in the form of rental income, and overall, every residential real estate holder is receiving a rental yield.

2. Rapid Urbanization

Millions of people continue to move to cities every year. This growth puts pressure on the need to construct quality housing, office, and commercial spaces. This trend makes real estate investment in India a prudent option for long-term investment. Investing in real estate in India makes prudent long-term investment sense.  

3. Government Initiatives

The introduction of the Real Estate Regulatory Authority (RERA) and the development of smart cities are great initiatives for the growth of the sector. Most importantly, foreign investors are encouraged by the measures that provide transparency, the legal framework for timely delivery, and investment protection.  

4. FinTech Enablement

The emergence of FinTech companies in India is changing the game on Indian property investment. With the introduction of tokenized real estate, fractional ownership, and digitized payment systems, property ownership is easier than ever for overseas investors, and they don’t need to deal with managing the property.

Role of GIFT City IFSC in Real Estate

GIFT City IFSC is a breakthrough for overseas real estate investment in India. GIFT City IFSC is the world’s first smart city designed under the GIFT (Gujarat International Finance Tec-City) project. It is India’s first International Financial Services Centre (IFSC) with a GIFT City IFSC allocation of 58.5 Km2 of prime real estate. GIFT City IFSC caters to the needs of foreign investors in a regulated, tax-efficient, technology-driven environment thereby providing access to structured products like;

1. Real Estate Investment Trusts (REITS)

REITS provide an opportunity to own income-generating real estate without physically buying the property. These tradeable units are offered under GIFT City IFSC’s provisions. They are listed on the GIFT City IFSC Stock Exchange. This provides foreign clients investing in Indian commercial real estate with liquidity and a constant income in the form of dividends.  

2. Infrastructure Investment Trusts (InvITS)

InvITS grants the ability to partake in India’s expanding infrastructure and is similar to REITS in terms of cash flow and management. They allow investment in large-scale infrastructure projects, such as highways, ports, and industrial parks.

3. Fractional Ownership models

Investors now buy stakes in high-value real estate assets using digital fractional ownership platforms. These refined owner models under GIFT City IFSC’s provisions for fractional ownership reduce the cost and risk, and increase the transparency of real estate investment.

How to Invest in India from Abroad - Real Estate Pathway

Historically, fragmented regulations, elevated taxation, and opacity made investing in India very cumbersome for overseas clients. However, pathways through GIFT City have made it:

• Establish a fund with GIFT City registration - Syphon in offshore capital for investments in residential, commercial, and mixed-use real estate.

• Invest in REITs and InvITs - Access various real estate and infrastructure investments offered on IFSC exchanges.

• Collaborate with India FinTech - Access tokenized and fractional real estate software for easy entry and management.

Such an approach limits compliance and operational burdens and streamlines capital repatriation.

Tax-Free Investment Benefits 

Historically, high taxes. especially on repatriation, have made investing in India unattractive to foreign clients. However, GIFT City IFSC brings in a host of tax-free investments:

• Capital Gains Exemption: REITs and InvITs placed within IFSC have tax-free capital gains.

• Dividend Distributions: Tax-free dividends in India for GIFT City investments.

• Rest of the World Comparison: Tax-free dividends and capital gains make investing in Indian real estate as competitive as in Singapore, Dubai, and Hong Kong.

Such tax-free capital moves help foreign clients enhance their ROI as India’s real estate continues to boom.

Technology Driving Transparency  

Technology is helping to build trust and reduce the risk in the Indian real estate sector:  

• Blockchain-Based Registries: Fraud risk is mitigated with honest records.  

• AI-Powered Valuation Tools: Identifying accurate pricing and market trend evaluation.  

• Digital Compliance Platforms: Foreign investors find legal, taxation, and reporting requirements less burdensome.  

FinTech companies in India are integrating these technologies to enhance the investment experience in terms of transparency and security.  

Why GIFT City Registration Matters  

For foreign investors, registering with GIFT City IFSC is the first and most critical step. Benefits include:  

• Regulatory Legitimacy: Complying with real estate laws and regulations while investing.  

• Access to Structured Opportunities: Invest in REITs, InvITs, and other opportunities.

• Investor Protection: IFSC regulations include oversight and safeguard.  

A simple registration allows global investors to bypass fragmented rules and operate in a single, unified environment.  

Conclusion  

For decades, India’s real estate market has attracted foreign investors, and GIFT City IFSC, along with other technologies, has streamlined the process. Structured investment products, such as REITs and InvITs, enhance accessibility.

The Indian real estate market is now more competitive and appealing for international investment because of tax-exempt advantages and clarity and transparency provided by fintech firms. Investors with residence and citizenship permits now have complete confidence in investing in real estate, in commercial, residential, and infrastructure development projects in India, and view India as a safe, profitable, and up-to-date location for foreign investment in real estate.  

After GIFT City registration and due to the rise of innovative FinTech firms in India, foreign investors have the opportunity to invest in and develop one of the fastest-growing real estate markets in the world.