Govt to monetise state-owned real estate via REITs; unlock billions in idle assets

India is set to transform its approach to state-owned real estate by channeling assets into Real Estate Investment Trusts (REITs), a strategy expected to release billions of rupees tied up in unused government property and expand the country’s rapidly growing yield-focused investment market.Union finance minister Nirmala Sitharaman, in the budget, outlined plans for dedicated REIT structures aimed at monetising real estate held by Central Public Sector Enterprises (CPSEs). Experts said the initiative could boost capital markets, strengthen public sector finances, and create a consistent stream of income-generating commercial assets for both domestic and international investors.Alok Aggarwal, chairman of the Indian REITs Association, explained that India’s REIT ecosystem has already helped formalise the commercial property sector. “High-quality office portfolios backed by multinational tenants, long-term lease structures and strong occupancy levels have helped deliver consistent distribution growth,” he said as quoted by ET.He added that by including CPSE-backed properties, the market could expand further, adding unique government-owned commercial and infrastructure-linked assets.Bhavik Vora, partner at Grant Thornton Bharat, highlighted the scale of government holdings, estimating CPSE real estate at over Rs 10 lakh crore.

He said that channeling these assets through REITs could generate steady rental income and yield-focused returns, similar to the performance of India’s listed REITs.“CPSEs spanning railways, ports, oil companies and banks are estimated to hold real estate worth over Rs 10 lakh crore. Channelled through REITs, these assets could deliver steady rental income and yield-focused returns, mirroring the success of India's listed REIT ecosystem," he said, as quoted by ET.However, Vora cautioned that many government assets are fragmented, leased at old rates, and not core to business operations. “Profitability post-REIT will hinge on a hard commercial truth—scale and rental quality matter more than portfolio breadth. These portfolios are often fragmented, non-core, and leased at legacy rents, so making them viable REITs would require upgrades, lease resets, and better tenant mix with sustainable payouts ultimately tied to occupancy and tenant quality.

”The initiative reflects a broader strategic shift: instead of treating government land and buildings as static holdings, they are being turned into revenue-generating assets that can attract long-term institutional investment.Since its launch in 2019, India’s REIT market has shown strong investor interest. The nation currently has five listed REITs managing over 176 million sq ft of premium office and retail space, with combined assets under management nearing Rs 2.35 lakh crore. These REITs have attracted sovereign wealth funds, pension funds, domestic mutual funds, and retail investors, drawn by stable rental returns and predictable income distribution.