Union budget 2026-27 backs Reits to monetize central govt land

BENGALURU: The Union budget 2026-27, presented by finance minister Nirmala Sitharaman on 1 February, has proposed setting up real estate investment trusts (Reits) to recycle and monetize land and property holdings owned by central public sector enterprises (CPSEs), signalling a shift towards market-linked management of government real estate assets.

The proposal to monetize large, under-utilized prime assets through Reit structures is aimed at unlocking long-term value from mature public land holdings, while improving balance-sheet efficiency at state-owned firms.

By positioning Reits as a key mechanism for asset monetization, the budget reinforces their growing role in India’s infrastructure and urban financing ecosystem, the Indian Reits Association (IRA) said. Dedicated CPSE REITs can accelerate capital recycling, expand access to high-quality, income-generating assets, and offer investors exposure through transparent and regulated instruments.

Reits pool income-generating real estate assets such as office parks and shopping malls, allowing investors to earn a share of rental income without owning the properties directly. Under Securities and Exchange Board of India (Sebi) regulations, at least 80% of a Reit’s assets must be completed and income-producing.

“Reits for CPSEs have been under discussion for quite some time, and the proposal has now been highlighted in Budget 2026. While the Reit structure will undoubtedly help CPSEs raise much‑needed capital for long‑term investments, a key near‑term challenge will be determining fair rental values for self‑owned assets,” said Bhavik Vora, partner at Grant Thornton Bharat.

India currently has five listed Reits—Embassy Office Parks Reit, Mindspace Business Parks Reit, Brookfield India Real Estate Trust (BIRET), Nexus Select Trust and Knowledge Realty Trust. Nexus Select Trust is the only retail-focused Reit, while the others are commercial office trusts.

According to IRA, the five Reits together have a gross asset value of more than ₹2.3 trillion.

“It enables PSUs to free up capital from their balance sheets while retaining operational control over strategic assets. At the same time, it deepens the Reit market by offering investors access to stabilized, income-generating assets leased to quasi-sovereign entities. This creates a strong proposition for retail investors, asset managers and institutional investors, while unlocking value for PSUs that own multiple commercial office properties,” said Apurva Muthalia, business head—real estate at Equirus Family Office.

All office Reits have reported growth in net operating income, occupancy and distributions in the first half of FY26, a trend expected to continue in the second half, driven by demand from global capability centres (GCCs) and domestic occupiers.

“By reiterating Reits and InvITs as core financing instruments for infrastructure and urban growth, and by proposing dedicated Reit structures to accelerate monetisation of CPSE real-estate assets, the Budget strengthens the long-term institutional capital pipeline for commercial real estate," said Ramesh Nair, managing director and chief executive, Mindspace Business Parks Reit.

Nair added that the continued push on digital infrastructure, including policy support for global cloud providers setting up data centres in India, is relevant as Mindspace Reit is currently the only listed Reit in India with an active data centre platform embedded in its portfolio.