Budget proposes to set up dedicated REITs to recycle CPSE realty assets

Experts say the proposal could expand investable real estate supply, deepen markets and provide liquidity

The government will recycle the assets of central public sector enterprises (CPSEs) by setting up dedicated real estate investment trusts (REITs), Finance Minister Nirmala Sitharaman said in her Budget speech on Sunday.

 

Experts believe that the move will expand the supply of investable real estate and deepen the investor pool, while also providing liquidity to the government. CPSEs hold significant land assets that were identified for monetisation through the government’s National Asset Monetisation Pipeline. With REIT structures typically seeing participation from large funds and institutional investors, the move could help the government fast-track its asset monetisation plans.

 

Anuj Puri, chairperson, Anarock, said dedicated Reits aimed at recycling CPSE assets could cover properties worth nearly Rs 10 trillion, spanning railway assets, port land, power transmission infrastructure, telecom towers, and other government-owned properties.

 

 

Amit Maheshwari, managing partner at AKM Global, a tax and consulting firm, said: “Monetising public-sector undertaking (PSU) real estate through REITs may give significant liquidity to the government. REITs give participation to retail investors for real estate assets. PSUs have a large chunk of those, and this will help them in raising money from retail investors.”

 

Chetan Chichra, partner, Grant Thornton Bharat, said monetisation of CPSE land and assets through REITs will expand investable-grade supply and deepen capital markets.

 

 Sitharaman noted that Reits have emerged as a successful instrument for asset monetisation over the years. “During this past decade, our Government has undertaken several initiatives for large-scale enhancement of public infrastructure, including through new financing instruments such as Infrastructure Investment Trusts (InVITs) and Reits and institutions like National Investment and Infrastructure Fund (NIIF) and National Bank for Financing Infrastructure and Development (NaBFID),” she said.

 

Anshuman Magazine, chairperson and chief executive officer (CEO) – India, South-East Asia, Middle East & Africa, CBRE, said that since CPSEs are often mandated to provide steady returns, their Reits are expected to focus on high-yield assets with stable income distributions. The move is also expected to increase participation from institutional investors, including mutual funds.

 

Vijay Agrawal, MD and sector lead infrastructure, Equirus Capital, highlighted that this monetisation has been in wish list of the government, but has not seen big success with the Railways too have been trying to monetise their land.

 

“Now we may see Reits holding railway stations with allied real estate developments like office parks, retail corridors, etc. We may also see bus stations housed in another category of Reits. This will embark creation of multiple sector focused Reit to house various categories of real estate assets,” Agrawal added. 

 

There are four publicly listed office REITs — Embassy Office Parks Reit, Mindspace Business Parks Reit, Brookfield India Real Estate Trust and Knowledge Realty Trust — and one publicly listed retail Reit, Nexus Select Trust.

 

The five collectively distributed over Rs 2,331 crore to more than 3.3 lakh unitholders during the second quarter of the financial year (Q2 FY26), according to the Indian REITs Association (IRA).

 

As of Q2 FY26, the total gross assets under management of the Indian REIT market stood at approximately Rs 2.35 trillion. Together, the five REITs manage a portfolio of 176 million square feet of grade-A office and retail space across India. Since their inception, they have cumulatively distributed over Rs 26,700 crore to unitholders.

 

REITs are mandated to distribute at least 90 per cent of their taxable income, according to the Securities and Exchange Board of India. REIT distributions are returns which can be in the form of dividends, interest, amortisation of debt received from the special purpose vehicles, other income, or a combination of these aspects.

 

Ramesh Nair, managing director (MD) and CEO, Mindspace Business Parks Reit, said easing foreign individual participation in Indian equities, along with dedicated Reit structures for CPSE asset monetisation, strengthens the pipeline for long-term institutional capital across real estate and infrastructure.

 

The IRA said the creation of dedicated Reits for CPSEs marks a significant and forward-looking shift in the government’s approach to public asset management.

 

“The move reflects a clear move from passive ownership to efficient, market-linked asset management, while unlocking long-term value from mature public assets and recycling capital into fresh infrastructure development. Dedicated CPSE Reits can accelerate capital recycling, improve balance-sheet efficiency for public enterprises, and expand access to high-quality, income-generating assets for a wider investor base through transparent and regulated instruments,” the association said.

 

According to Puri, the objective of the decision is to attract institutional capital without surrendering control over assets, while generating recurring revenue for CPSEs. “This supports industry demands for simplified Reit taxation and expanded participation of small/medium Reits. It will deepen institutional capital in Indian real estate infrastructure. However, we must await subsequent policy circulars for a more detailed framework.”