Listed REITs beat Nifty over 2 years: Better bet than dividend stocks?

For those looking to earn a steady income from their investments, Real Estate Investment Trusts or REITs can be a more lucrative option to consider that divided stocks, especially amid market volatility seen in the last two years. REITs, allow investors to participate in income-generating properties, such as office parks and shopping centres, without buying or managing property directly. Their returns can come from both periodic distributions and changes in the market price of their units.

According to data available on ACE Equity till November 4, REITs performance has been mixed across year-to-date, one-year and two-year basis, but has largely managed to outperform the benchmark Nifty 50 index. The recent outperformance of REITs has been supported by measurable improvements in rental income and occupancy, alongside regulatory changes that could expand institutional demand, said Prashant Gupta, chief business officer, SAMCO Wealth. While the Nifty is down 8 per cent YTD, Mindspace Business Parks REIT and Nexus Select Trust remain the gainers, having risen over 3 per cent each, while Brookfield India Real Estate Trust REIT (down 3.5 per cent) and Embassy Office Parks REIT (down 5.5 per cent) have outperformed.

Knowledge Realty Trust remains the only laggard. Bagmane Prime Office was listed in May this year and continues to trade above IPO levels. (function(){function e(){window.addEventListener('message',function(e){if(e.data['datawrapper-height']!==void 0){var t=document.querySelectorAll('iframe');for(var n in e.data['datawrapper-height'])for(var r=0,i;i=t[r];r++)if(i.contentWindow===e.source){var a=e.data['datawrapper-height'][n]+'px';i.style.height=a}}})}e()})(); Longer time frame of two years, captures this trend better as the four REITs, barring Knowledge Realty as it debuted in 2025, have risen 2-32 per cent as against a 0.14 decline in the index. ALSO READ: Sebi issues detailed rules for depositary receipts on REIT, InvIT units "As of September 2026, their annual distribution yields ranged from 4.8 per cent for Mindspace to 6.3 per cent for Brookfield India, with a median of 5.8 per cent.

Payouts also doubled to Rs. 3,136 crore in Q1 FY27, noted Prathamesh Kadival, research analyst at Bonanza, adding this makes them a suitable bet for investors seeking steady income, though unit prices can still swing with office demand. According to CareEdge Ratings, average occupancy across listed office REITs increased from approximately 84 per cent in FY2024 to 89 per cent in FY2025 and 92 per cent in FY2026. Average rental income across listed office REITs grew by around 20 per cent between FY2025 and FY2026, supported by contractual rent escalations, lease renewals at higher rates and healthy leasing activity.

This growth strengthened the cash flows underpinning distributions to unitholders. REITs vs dividend stocksThe returns offered by REITs are also more predictable than dividend stocks. Regulations require them to distribute at least 90 per cent of their distributable cash flow, whereas a company’s dividend is at its board’s discretion.

Source: SAMCO Wealth "Because REIT income comes from contracted leases, growth in distributions is also easier to predict. REIT distributions are also more tax-efficient than equity dividends," said Shariq Merchant, Associate Director - Investments, WhiteOak Capital Mutual Fund. Given the contracted and predictable nature of cash flows in REITS, they behave differently relative to equities and carry a lower beta of <0.2 to the Nifty, added Merchant.

REITs, therefore, can be a useful portfolio diversification tool for retail investors, believes Gupta. It provides exchange-traded exposure to income-generating real estate without requiring investors to purchase or manage property directly. However, investors must understand that a REIT behaves somewhat like bonds because investors buy them for regular income.

A 10-year yield at 7.40 per cent now sits above every listed REIT’s yield, so the spread to the risk-free rate is negative, and the market is paying for growth, not income, said Harshal Dasani of INVasset PMS. If the RBI’s tightening runs longer than December, capitalisation rates rise, then the unit prices that have been climbing toward net asset value stop. The number to watch is the gap between the REIT yield and the 10-year; the day the bond yield turns, REITs re-rate before the index does, he added.

Disclaimer: Views and outlook in this report belong to the brokerages and analysts cited. They do not reflect the views of Business Standard. Readers are advised to exercise discretion.