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The Growth Trajectory of SM REITs in India: Opportunities and Outlook

In recent years, India’s commercial real estate sector has witnessed a paradigm shift with the emergence of Small and Medium Real Estate Investment Trusts (SM REITs).

1st May 2025 | 5 Mins

In recent years, India’s commercial real estate sector has witnessed a paradigm shift with the emergence of Small and Medium Real Estate Investment Trusts (SM REITs). These investment vehicles have opened new avenues for High Net-Worth Individuals (HNIs) seeking diversified and income-generating assets. Unlike traditional real estate investments, SM REITs offer a structured and regulated platform, allowing investors to participate in high-quality commercial properties with greater transparency and liquidity. This blog delves into the growth trajectory of SM REITs in India, highlighting the opportunities and future outlook for discerning investors.

Market Potential and Growth

The potential market size for SM REITs in India is substantial. According to a report by CBRE South Asia Pvt. Ltd., the SM REIT market is expected to exceed USD 60 billion by 2026, driven by over 300 million square feet of completed commercial office space suitable for SM REITs, with an additional 50 million square feet anticipated by 2026.

Major cities like Mumbai, Delhi-NCR, Bengaluru, and Hyderabad are leading the way, offering well-managed portfolios of small and mid-sized leased assets under a strata ownership model. Mumbai recorded the highest potential SM REIT-ready completed office stock of approximately 75 million square feet as of June 2024, with around 10-plus million square feet of upcoming supply by 2026.

Regulatory Support

The Securities and Exchange Board of India (SEBI) has played a pivotal role in facilitating the growth of SM REITs. By introducing a regulatory framework that lowers the minimum investment barrier to INR 10 lakh, SEBI has made commercial real estate investment more accessible to a broader range of investors.

Additionally, SEBI mandates that at least 95% of the assets in SM REIT schemes must be fully developed and revenue-generating, compared to the 80% requirement for larger REITs.

Investor Participation and Liquidity

SM REITs offer increased liquidity as units are traded on stock exchanges, allowing investors to enter or exit investments with relative ease. The lower investment threshold and regulatory oversight have broadened the investor base, attracting more HNIs to this asset class. According to ICRA, the introduction of SM REIT regulations could potentially unlock a monetisation opportunity of ₹68,000-71,000 crore for small office spaces.

Tax Implications

The Union Budget 2024-25 introduced tax reforms aligning with SM REITs, reducing the holding period for long-term capital gains from 36 months to 12 months, making them more attractive and accessible to investors.

Conclusion

The growth trajectory of SM REITs in India presents a promising avenue for HNIs seeking to diversify their investment portfolios. With strong regulatory support, substantial market potential, and increased investor participation, SM REITs are poised to play a significant role in shaping the future of India’s commercial real estate landscape. In this evolving ecosystem, hBits, a leading property investment company, is helping bridge the gap between institutional real estate and individual investors. By offering fractional ownership in Grade-A assets, hBits is enhancing accessibility and transparency in commercial property investments.

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