“Wealth is the slave of a wise man, the master of a fool.” — Seneca
Final Brief — Why Most Indian REITs Deserve Deep Skepticism
REITs promise effortless real‑estate exposure, yet they frequently deliver the worst of both worlds: muted returns, full tax drag, and equity‑like volatility. Remember: REITs are exit vehicles, not wealth‑creation vehicles.
1️⃣ Who Really Wins?
| Step | Winner | What Happens |
|---|---|---|
| Build & lease‑up | Sponsor / Developer | Buys land cheap, develops, captures appreciation |
| Stabilise cash flows | Sponsor | Locks in headline yield |
| Sell to REIT | Sponsor | Crystallises gains, exits at a premium |
| Hold & hope | Retail Investor | Gets ageing asset, slowing rent growth, rising upkeep |
Result: You’re buying yesterday’s upside and tomorrow’s headaches.
2️⃣ The Scoreboard
- Nifty REITs & InvITs Index: ~3 % CAGR since 2019 (< 2 % cash yield)
- BSE Realty Index: +317 % in the same window
- Nexus Select: An outlier—more a mall‑operator arbitrage than a classic REIT play
In short, returns accrue to the builder, not the buyer.
3️⃣ My Rule: Buy Square Feet, Sell Yield
I skip REITs and instead:
- Acquire raw square footage.
- Fix the mess: title cleanup, tenant mix, lease structuring.
- Package the yield and exit to buyers who crave “8–10 % with safety.”
That asymmetric spread is where wealth compounds.
REITs invert the trade: you pay full price, assume all future risk, and surrender control.
4️⃣ Questions to Ask Before Buying a REIT
| Question | Why It Matters |
|---|---|
| Who built the assets? | If the sponsor has already cashed out, incentives are gone. |
| Who manages them now? | Related‑party conflicts erode transparency. |
| What fuels the yield? | Pure rent vs. interest, one‑offs, or amortisation? |
| Can NAV grow without dilution? | Debt‑funded purchases push risk to you. |
| Is this optionality or dead certainty? | Are you buying upside or funding someone else’s exit? |
🧭 A Stoic Investor’s Alternatives
- Direct ownership: Early‑stage or distressed buys.
- Income needs: Triple‑net leasebacks, high‑grade bonds, dividend stocks with reinvestment runway.
- Still want REITs? Analyse them like utilities—focus on governance, lease tenor, tenant quality, and tax leakage.
🎯 Final Word
REITs aren’t bad; they’re just optimised for someone else’s benefit. Make sure that “someone” is you:
“Do not buy what the smart money is selling. Be the smart money—build, lease, package, and sell.”
This brief is for educational purposes only; it is not investment advice.
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