Radhika Gupta, CEO of Edelweiss Mutual Fund, has clarified that SEBI classifies Real Estate Investment Trusts (REITs) as equity, not fixed-income products. This distinction is important as the fund house launches the Edelweiss Nifty REITs & Realty Index Fund. Investors should note that while REITs offer rental income, their unit prices are market-linked and carry equity-like risks.
Radhika Gupta, Managing Director and CEO of Edelweiss Mutual Fund, has clarified the classification of Real Estate Investment Trusts (REITs), emphasizing that the Securities and Exchange Board of India (SEBI) categorizes them as equity rather than fixed-income instruments. This statement comes as the fund house introduces the Edelweiss Nifty REITs & Realty Index Fund, an offering that provides investors with exposure to commercial real estate assets.
Many investors often group REITs with bonds or fixed deposits because these trusts distribute regular rental income. However, Gupta highlighted that this income distribution does not make them debt instruments. While the regular payouts resemble interest, the underlying unit prices of REITs fluctuate according to market conditions, which is a core characteristic of equity investments. Unlike fixed-income products that focus on capital preservation, REITs are subject to market volatility.
To help investors understand the risk profile, Gupta noted that pure-play REIT indices have historically shown a volatility level of approximately 10-11%. While this is lower than the 14-16% volatility often seen in the broader equity market, it is substantially higher than the stable returns expected from traditional debt instruments. This confirms that REITs should be treated as a form of equity with its own set of market-linked risks.
The clarification coincides with the launch of the Edelweiss Nifty REITs & Realty Index Fund, with the New Fund Offer (NFO) period open from August 5 to August 19, 2026. The fund is structured to allocate roughly 60% of its assets to REITs and 40% to real estate stocks. Given this composition, the product has been assigned a 'Very High' risk rating by the fund house.
Investors looking into REITs must understand the factors that drive these investments. Because they are tied to commercial real estate, their performance is influenced by occupancy rates, lease renewal cycles, and overall demand for office or retail space. Additionally, REIT prices are sensitive to interest rate movements; when interest rates rise, they can put pressure on the valuation of these trusts.
Experts suggest that investors should view REITs primarily as a tool for portfolio diversification rather than a replacement for safe assets like bank fixed deposits. By providing access to commercial properties that might otherwise require significant capital to own directly, REITs serve as a bridge to real assets. However, because they are market-linked, they should typically form part of the equity portion of an investment portfolio. The key monitorable for investors going forward will be how changes in interest rates and property market cycles affect the returns and stability of these holdings.