Attractive Rental Yields of 7–10% and Capital Appreciation: Why Smart Investors Are Turning to REITs & AIFs in India

With commercial real estate delivering 7–10% rental yields and rising capital gains, Indian investors are increasingly diversifying into REITs and AIFs for liquidity, transparency, and institutional-grade returns.

The Fortune Realty Group

10/23/20254 min read

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Attractive Rental Yields of 7–10% and Capital Appreciation: Why Smart Investors Are Turning to REITs & AIFs in India

With commercial real estate delivering 7–10% rental yields and rising capital gains, Indian investors are increasingly diversifying into REITs and AIFs for liquidity, transparency, and institutional-grade returns.

For decades, investing in Indian real estate meant one thing — buying a home. But the investment landscape has evolved dramatically. Today’s smart investors are shifting towards commercial real estate, REITs (Real Estate Investment Trusts), and AIFs (Alternative Investment Funds) to secure higher returns, steady rental income, and portfolio diversification.

According to the Luxury Residential Outlook Report 2025 by India Sotheby’s International Realty, nearly 41% of HNIs and ultra-HNIs plan to invest in commercial real estate over the next 24 months, with 24% exploring AIFs to strengthen and diversify their wealth portfolios.

The New Era of Real Estate Investment in India

REITs in India have opened new doors for individuals who seek the benefits of owning premium real estate — without the operational hassles. Listed on stock exchanges, REITs pool investor funds into Grade A office spaces, malls, warehouses, and other income-generating properties, offering 7–10% rental yields along with capital appreciation.

The five listed REITs — Embassy Office Parks, Mindspace Business Parks, Brookfield India, Nexus Select, and Knowledge Realty Trust — collectively boast a market capitalization of nearly ₹1.5 lakh crore, having already distributed over ₹24,000 crore in income to investors.

Key Advantages of REIT Investments:

  • ✅ Steady dividend income and unit price growth

  • Liquidity, as units trade like stocks

  • Transparency and regulation under SEBI

  • Access to institutional-grade assets previously reserved for HNIs

This makes REITs an ideal option for investors seeking stable returns with flexibility and a hedge against inflation.

Why REITs Are Gaining Momentum Among Investors

For investors with a longer investment horizon, Alternative Investment Funds (AIFs) present a powerful opportunity. These funds combine income-generating real estate assets with high-growth projects to achieve strong IRRs (Internal Rate of Returns).

  • Debt Real Estate AIFs: Target 14–16% IRRs, offering better returns than traditional fixed-income instruments.

  • Equity Real Estate AIFs: Can yield 20%+ IRRs, depending on the project mix and risk management strategies.

AIFs are particularly attractive to high-net-worth individuals (HNIs) who prefer a professionally managed, diversified, and structured investment approach. By pooling funds across different geographies and asset classes — from office assets in Bengaluru to warehousing hubs in Pune — AIFs mitigate concentration risk while unlocking long-term value.

AIFs: Higher Returns with Structured Wealth Growth

India’s commercial property segment remains one of the strongest globally. In Q2 2025, the top eight cities recorded 21.4 million sq. ft. of gross office leasing, with a total of 42 million sq. ft. in the first half of 2025 — on track to break records by year-end.

The vacancy rate has dropped from 18.5% to 15.7%, reflecting strong demand from IT firms, startups, MNCs, and India-facing businesses. With such demand, commercial assets, office spaces, and pre-leased properties are fast becoming preferred investment vehicles for both individual and institutional investors.

The Strength of India’s Commercial Real Estate Market

For modern investors, balancing stability, liquidity, and capital growth is crucial. While residential real estate continues to serve as a long-term wealth anchor, REITs and AIFs offer a compelling way to achieve professional diversification and institutional-quality exposure without operational burdens.

A smart mix of REITs, AIFs, and select residential holdings ensures steady income, capital appreciation, and reduced volatility — the perfect combination in an uncertain economic environment.

Building a Balanced Investment Portfolio

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