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Summary: Parag Parikh's CIO sees REITs as a predictable asset for the next three to five years. Two of their funds already have close to 9 per cent parked there. We checked the returns, the risks, and whether REITs make sense for you.
Among diversified equity funds with the highest exposure to Real Estate Investment Trusts (REITs), the top two are from Parag Parikh Mutual Fund. For the uninitiated, the diversified category covers flexi-cap, multi-cap, large & mid-cap, ELSS and value-oriented funds.
The fund house’s ELSS scheme and its flagship Flexi Cap fund had the highest REIT allocations at 4.8 per cent and 4.1 per cent, respectively, as per April 2026 disclosures.
Parag Parikh Flexi Cap also raised exposure last month. It bought 35.5 lakh units of Embassy Office Parks REIT and 2.3 crore units of Brookfield India Real Estate Trust.
Top 5 diversified funds with highest REIT exposure
| Fund | Allocation to REITs (%) |
|---|---|
| Parag Parikh ELSS Tax Saver | 4.8 |
| Parag Parikh Flexi Cap | 4.1 |
| WhiteOak Capital Large & Mid Cap | 2.8 |
| WhiteOak Capital Multi Cap | 2.6 |
| Templeton India Value | 2.6 |
| As of April 2026 | |
The timing is worth noting. The fund house is increasing its real-estate exposure at a time when equity markets remain volatile and when their cash pile is high, a signal worth paying attention to.
What Rajeev Thakkar thinks of REITs
In an interview with 1 Finance, chief investment officer Rajeev Thakkar listed a few reasons why the fund house has close to 9 per cent allocation to REITs.
His broad argument: REITs sit somewhere between pure equity and fixed income, though they behave more like equity. They offer investors two sources of return: regular cash payouts and capital appreciation.
According to Thakkar, investors can expect double-digit returns if current yields of around 6 per cent are combined with 5-6 per cent capital appreciation. In a separate conversation with independent journalist Sonia Shenoy, he added that REITs are good for predictable returns over the next three to five years.
The fund house clearly sees merit in the asset class. But does their performance support this optimism?
How REITs have actually performed
The four REITs that have traded publicly for over a year have delivered healthy annualised total returns since listing. These returns include both price appreciation and cash distributions.
What you would have earned, had you invested at listing
| REITs | Listing date | Overall return since listing (%) | Div. yield over last year (%)* |
|---|---|---|---|
| Embassy Office Parks REIT | Apr 1, 2019 | 11.5 | 5.8 |
| Mindspace Business Parks REIT | Aug 7, 2020 | 20.7 | 12.7 |
| Brookfield India Real Estate Trust | Feb 16, 2021 | 9.1 | 6.7 |
| Nexus Select Trust | May 19, 2023 | 22.3 | 5.8 |
| Returns are annualised in XIRR and include both price gains and cash payouts; calculated from the REIT’s listing-day opening price to its closing price on May 26, 2026. *Dividend yield is based on the last four distributions. | |||
The numbers are respectable. Mindspace and Nexus Select have delivered over 20 per cent annualised returns since listing, comparable to good equity performance, but with a meaningful income component built in.
Why mutual funds are warming up to REITs
REITs come with advantages that can make them useful in a portfolio.
Steady income: REITs earn rental income on high-quality properties like commercial office buildings or malls. They are required to distribute at least 90 per cent of their income as cash payouts or dividends to unitholders, ensuring a steady stream of passive income even if their market price fluctuates. Recent dividend yields have ranged from 5.8 to 12.7 per cent.
Diversification: REITs give investors exposure to real estate without the usual problems of buying property directly: large ticket sizes, poor liquidity, paperwork and concentration in one asset. They also diversify a portfolio beyond the traditional equity-debt mix.
Less risk of bad assets: REITs are heavily regulated on asset quality. At least 80 per cent of their assets, by value, must be completed and rent-generating. Speculative or under-construction properties are largely off the table.
These strengths explain why REITs are becoming a serious allocation for some mutual funds. For investors seeking income with some growth potential, they can play a useful role. But they are not risk-free.
Risks to bear in mind
Payouts can vary: The most attractive part of REITs is their regular cash payout. But investors should not assume that future payouts will always match past ones.
REIT distributions do not come only from rental income. They also include interest income, repayment by subsidiaries (special purpose vehicles) and sometimes gains from asset sales. This makes the size and composition of payouts important. A high yield may look attractive, but investors must check whether it is from stable rental income or helped by one-off items.
Liquidity is thin: REIT units trade on exchanges, but daily volumes are far lower than for most stocks. Exiting a large position quickly, especially in a downturn, can be difficult without moving the price against you.
Market prices can still fall: REITs are not immune to broader equity market swings. They may be less volatile than pure equity, but their unit prices can and do fall during downturns. The income cushions the blow; it does not eliminate it.
Your takeaway
REITs occupy a genuinely useful middle ground with real asset exposure and regulated income distribution. For investors seeking income alongside modest growth, they can be a useful addition to a portfolio. But they cannot replace the role of equity for generating wealth and, therefore, should not take up more than 10 per cent of your portfolio.
Need help choosing funds that suit your goals?
Value Research Fund Advisor can help you build a simple, research-backed mutual-fund portfolio without chasing every new market theme. Our analysts study fund portfolios, track records, risks, costs and consistency before recommending funds that are worth holding for your goals.
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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