Based on the current Indian REIT landscape, here are the approximate distribution yields: [1]
| REIT | Asset Type | Yield |
|---|---|---|
| Embassy REIT | Office parks (Bangalore, Pune, Mumbai) | ~6–7% |
| Mindspace REIT | Office (Hyderabad, Mumbai) | ~7% |
| Nexus Select REIT | Retail malls | ~6.5% |
| Brookfield REIT | Office / mixed | ~7% |
These yields reflect the mandatory 90% distribution of net distributable cash flow — a structural feature of REITs under Indian law. [1]
A raw yield number means little without a benchmark. Ask:
1. What is the Risk-Free Rate — definition">risk-free rate?
The 10-year G-Sec currently yields ~7.1%. [3] Indian REITs at 6.5–7% are offering yields broadly in line with a long-duration G-Sec — but REITs carry additional risks (see below).
2. What spread are you earning for those extra risks?
The spread over G-Secs is thin — roughly 0–70 bps — which means the market is not pricing in much margin of safety for REIT-specific risks.
| Risk | What It Means |
|---|---|
| Interest rate risk | REIT unit prices fall when rates rise — identical to long-duration bonds [1] |
| Vacancy risk | Income drops if anchor tenants exit [1] |
| Equity market beta | During broad sell-offs, REITs fall alongside equity [1] |
REITs are not a fixed income substitute. They sit between equity and bonds in the risk spectrum. [1]
Rather than "what yield should I accept?", ask:
Am I being adequately compensated — via yield spread over G-Secs, plus potential capital appreciation — for vacancy risk, interest rate sensitivity, and equity beta I'm taking on?
At a near-zero spread to G-Secs, the answer requires scrutiny of occupancy rates, tenant quality, and WALE (Weighted Average Lease Expiry) for each REIT individually.
Apply this → For the passive/active framing on whether to use a REIT fund vs. direct REIT holdings, see the instruments table in Module 08 — direct listed REITs are already diversified; a fund-of-REITs just adds a fee layer. [2]