Investors looking to participate in India's commercial real estate market without buying property directly will soon have a new option. Edelweiss Mutual Fund has launched the Edelweiss Nifty REITs & Realty Index Fund, which it describes as India's first REIT-oriented mutual fund. The new fund offer (NFO) will open for subscription from August 5 to August 19.
The open-ended index fund will track the Nifty REITs & Realty Total Return Index, giving investors exposure to a portfolio of listed Real Estate Investment Trusts (REITs) and listed real estate companies through a single investment. According to the scheme documents, the fund aims to replicate the performance of the benchmark index, subject to tracking error.
How the fund works
Unlike direct real estate purchases that require significant capital and involve maintenance and liquidity constraints, the new fund offers exposure to commercial real estate through the mutual fund route. Investors can buy and redeem units like any other open-ended mutual fund.
The benchmark index was launched by NSE Indices earlier this year. Since India currently has only a limited number of listed REITs, the index combines listed REITs with companies from the real estate sector. Under the index methodology, REITs currently account for at least 60% of the portfolio, while the balance is invested in listed real estate companies. As more REITs get listed, the allocation to REITs is expected to rise over time.
Why it is significant
Announcing the launch on social media, Edelweiss Mutual Fund Managing Director and CEO Radhika Gupta said the product is designed to make investing in real estate more accessible by addressing challenges such as high capital requirements, limited liquidity and concentration risk associated with buying physical property.
Another feature highlighted by Gupta is the tax treatment. According to her, distributions received from the underlying REITs can continue to remain invested within the mutual fund, allowing them to compound instead of being paid out as regular distributions, which could improve tax efficiency for long-term investors.
The launch follows the introduction of dedicated REIT-based indices by NSE, paving the way for passive investment products linked to India's listed commercial real estate market. While India's REIT market remains relatively small, the new fund provides retail investors with an additional avenue to diversify their portfolios without the large ticket size typically associated with property ownership.
