NSE launches India’s first Reits and InvITs index

The new index – Nifty REITs and InvITs Index – aims to track the performance of REITs and InvITs that are publicly listed and traded on the NSE. The weighting of securities within the index is based on their free-float market capitalization, each subject to a safety cap of 33%, and the total weighting of the top-3 securities is capped at 72%. The base date of Nifty Reits & InvITs Index is 1 July 2019 and the base value is 1,000. The index will be reviewed and rebalanced on a quarterly basis.

Reits and InvITs are investment vehicles that own revenue-generating real estate and infrastructure assets, respectively. REITs and InvITs can be an option for investors looking for regular income generation through a diversified portfolio of real estate or infrastructure assets.

“Reits and InvITs are recognized as strong alternative financial instruments to raise funds against cash-generating infrastructure and real estate projects. For investors, these instruments provide exposure to real estate or infrastructure assets and offer diversification of risk from regular asset classes such as equity, debt and gold and generate regular income,” said Mukesh Agarwal, Chief Executive Officer, NSE Indices said.

“Globally, Reits and InvITs have been a good way for investors to diversify their portfolios. But in India, the market is quite new and still developing. If a mutual fund launches a fund tracking such an index, then it can be a good option for investors to consider a diversified portfolio instead of betting on REITs or InvITs, but we have to see if such funds will be successful. How are the funds taxed? ,” said Dipesh Raghav, founder of PersonalFinancePlan.

Top constituents of the Nifty REITs & InvITs index include Embassy Office Parks REIT (32.9% weight), POWERGRID Infrastructure Investments (20.2%), Mindspace Business Parks REIT (15.3%), India Grid Trust (15.3%).

The index has given a total return of negative 2.1% so far, while over a one-year period, it has given a total return of negative 1.7%, which includes share price performance and earnings distribution to shareholders.

Since inception (July 1, 2019), the index has given a Compound Annual Growth Rate (CAGR) total return of 10.48% as against 12.06% returned by Nippon India ETF Nifty BeS. The index has a weighting of 57.5% for realty, 35.6% for electricity and 6.8% for services.