If you want rental income without buying and managing property, SM REITs (Small and Medium REITs) offer a way to earn steady payouts and modest gains with ease, transparency, and liquidity minus the hassle of dealing with tenants or physical assets.
Like traditional REITs, SM REITs pool investor money to acquire and manage income-generating real estate. The difference lies in scale: while large REITs own portfolios worth over ₹500 crore, SM REITs focus on smaller assets between ₹50 crore and ₹500 crore. This makes them far more accessible, with a minimum investment of ₹10 lakh.
Instead of buying a property yourself, you invest in the SM REIT, which owns and manages assets such as office buildings, retail spaces, warehouses, logistics centres, and hospitals. SM REITs typically target small to mid-sized buildings suited for businesses in the SME segment.
Returns tend to be stable and moderate, usually in the 9–12% range, making SM REITs suitable for investors seeking steady income and capital protection rather than high-growth, development-driven gains.
The downside
While SM REITs offer attractive benefits, they also carry risks. Property value fluctuations can affect the REIT’s unit price, and as a relatively new asset class, their long-term performance is still untested.
Retail investors should conduct thorough due diligence before investing. This includes reviewing financial statements, understanding the REIT’s strategy, assessing the quality of its property portfolio, and analysing broader market conditions. It’s equally important to study offer documents carefully, looking at asset details, projected yields, and Net Asset Value (NAV) disclosures.
Investors must recognise the key difference between REITs and mutual funds. Mutual funds offer T+1 or T+2 redemption with minimal impact cost, making it easy to access money quickly. SM REITs, however, have limited liquidity; finding a buyer may take weeks or months, and urgent exits often require selling at a discount, reducing returns. In short, mutual funds can be redeemed within a day or two, whereas exiting a REIT investment generally takes much longer.
Taxation also differs: REIT income is taxed component-wise, interest is taxed at the investor’s slab rate, dividends may be exempt, and amortisation is adjusted against capital gains.
Note to the Reader: This article has been produced on behalf of the brand by HT Brand Studio and does not have journalistic/editorial involvement of Hindustan Times. The content is for information and awareness purposes and does not constitute any financial advice.