SEBI's Equity Reclassification Drives REITs to 29% Returns While Traditional Real Estate Stocks Fall Up to 37%

Market analysts reported that listed Real Estate Investment Trusts (REITs) in India had delivered impressive returns of up to 29 percent during the current year, creating a stark contrast with traditional real estate stocks that witnessed declines ranging from 20 to 35 percent over the same timeframe. The performance differential has drawn renewed attention to REITs as stable income assets with growing institutional appeal.

Industry experts indicated that the Securities and Exchange Board of India's (SEBI) recent decision to grant equity status to REITs would likely enhance liquidity, facilitate inclusion in mutual fund portfolios, and broaden investor participation in the segment.

Outstanding REIT Performance Metrics

Market data revealed that Mindspace Business Parks REIT had emerged as the top performer, generating approximately 29 percent returns over a one-year period. Brookfield India REIT followed with around 17 percent returns, while Nexus Select Trust and Embassy Office Parks REIT posted gains of 12 percent and 4.2 percent respectively.

Traditional Real Estate Stocks Face Headwinds

Contrasting sharply with REIT performance, analysts noted that the Nifty Realty index had fallen approximately 20 percent over the past year. Godrej Properties experienced the steepest decline, plummeting about 37 percent. Other major players including Brigade, Sobha, Prestige Estates, Lodha Developers, Oberoi Realty, Phoenix Mills, and Anant Raj recorded declines ranging from 16 to 31 percent.

SEBI's Game-Changing Policy Shift

Market participants highlighted that SEBI's announcement around September 12, 2025, reclassifying REITs as equity instruments represented a significant policy milestone. Experts anticipated that this change would drive mutual fund inclusion, enhance liquidity, and support higher valuations for REIT fundraising mechanisms.

Understanding the REIT Advantage

Financial analysts explained that REITs demonstrated superior performance due to their ownership and management of income-generating real estate assets including offices, malls, and industrial parks, providing relatively steady rental income and distribution potential that appealed to investors in volatile markets.

Industry observers pointed out that traditional real estate developers bore significant risks in project execution, regulatory approvals, debt management, and demand cycles, factors that weighed heavily on their earnings performance.

Expert Analysis and Market Outlook

Khushi Mistry from Bonanza Research characterized the equity reclassification as a "game changer," explaining that it would enable inclusion in mutual funds, improve liquidity, and increase retail participation. She expressed preference for Embassy, Mindspace, and Brookfield among REITs, citing their high-quality properties, strong occupancy rates, and rental escalation potential.

Kranthi Bathini from WealthMills Securities described REITs as combining equity-like upside potential with debt-like income stability. For traditional realty stock investments, he recommended a cautious approach, suggesting them only for aggressive investors who could tolerate volatility and project execution risks.

Key Monitoring Parameters

Market watchers identified several critical factors to monitor going forward, including fund inflows into REIT units from mutual funds and institutional players, potential benchmark index inclusion and re-rating of REITs, persistence of performance differentials, and the ability of REITs to sustain outperformance during market up cycles.

Analysts also emphasized the importance of tracking balance sheet strength, vacancy rates, and lease escalation trends within REIT portfolio performance as key indicators of future success.