SEBI REIT and InvIT trading rules: how bidding, allotment and trading lot sizes work for retail investors

When Embassy Office Parks became India's first listed Real Estate Investment Trust in April 2019, the minimum cheque a retail investor needed to write was around Rs 2 lakh, and units traded in blocks worth roughly Rs 1 lakh on the exchange. Within days of that listing, on 23 April 2019, the Securities and Exchange Board of India issued circular SEBI/HO/DDHS/DDHS/CIR/P/2019/59, cutting those thresholds sharply and, crucially, reducing the secondary-market trading lot to a single unit. That one circular did more to open REITs and Infrastructure Investment Trusts (InvITs) to ordinary savers than any marketing campaign, and it remains the reference point for how bidding, allotment and trading lots work today.

This midday pulse compares REITs and InvITs head to head for a retail investor chasing regular, largely passive income, and walks through the exact mechanics SEBI prescribes for buying at issue and trading on the exchange. Both products are governed by dedicated 2014 regulations, both must distribute at least 90% of net distributable cash flow, and both are now taxed under the same capital-gains rates that took effect on 23 July 2024. The differences lie in the underlying assets, the entry ticket at the initial offer, and the risk profile you are signing up for.

Side-by-Side Comparison

A REIT pools money to own income-producing real estate, predominantly completed, rent-generating commercial offices and malls. Under the SEBI (Real Estate Investment Trusts) Regulations 2014, at least 80% of a REIT's value must sit in completed and rent-generating property, with no more than 20% in under-construction or other permitted assets. India had four listed REITs as of 2024-25: Embassy Office Parks (listed 2019), Mindspace Business Parks (2020), Brookfield India Real Estate Trust (2021) and Nexus Select Trust (May 2023), the last being the country's first retail-focused, mall-led REIT.

An InvIT does the same pooling for infrastructure: operating power-transmission lines, toll roads, gas pipelines and fibre networks. The SEBI (Infrastructure Investment Trusts) Regulations 2014 similarly require a publicly offered InvIT to hold at least 80% of its value in completed, revenue-generating infrastructure. Listed names such as IndiGrid, PowerGrid InvIT, IRB InvIT and India Grid have made this asset class familiar to income investors since the first InvIT listings in 2017.

Because both structures are pass-through vehicles that must hand back at least 90% of cash flow at least twice a year, they behave more like listed income instruments than growth stocks. If you want to model the yield-plus-appreciation profile before you commit, the Oquilia real estate ROI calculator lets you stress-test rental yield and capital-value assumptions the same way you would for a physical property.

How Bidding, Allotment and Trading Lots Work

The mechanics that SEBI standardised in the 23 April 2019 circular sit at the heart of this angle, so it is worth being precise. There are two distinct sizes to understand: the bidding or subscription lot at the initial public offer, and the trading lot on the stock exchange after listing.

At the public issue, an investor applies through the book-building process just as with a company IPO, using ASBA (Application Supported by Blocked Amount) or the UPI route. The 2019 circular directed that, for REITs, the minimum application value be set within a band of Rs 10,000 to Rs 15,000, and the allotment be made in multiples of a lot whose value also falls in that band. For InvITs, the minimum application value was fixed within a band of Rs 1,00,000 to Rs 1,50,000. The merchant bankers fix the exact number of units per lot within these bands based on the offer price, which is why two REIT IPOs can quote slightly different rupee minimums while both stay inside the SEBI-mandated range.

The bigger shift was on the secondary market. Before the circular, REIT units traded in lots worth about Rs 1 lakh and InvIT units in lots worth about Rs 5 lakh, which effectively locked out small savers. The 23 April 2019 circular reduced the trading lot to one unit for both REITs and InvITs. In practice this means that once units are listed, you can buy or sell as few as one unit through your regular demat and trading account, so the entry ticket on the exchange is simply the price of a single unit rather than a lakh-rupee block.

A one-unit trading lot has a direct consequence for liquidity: the smaller the divisibility, the easier it is for a retail buyer to enter or exit without moving the price. SEBI's stated intent in the circular was to broaden retail participation, and the entry economics now resemble those of buying a single listed share rather than a wholesale real-estate stake. Investors should still confirm the exact minimum application value in the specific offer document, since the merchant bankers set the precise figure inside the SEBI band for each issue.

Tax Treatment

Taxation of REITs and InvITs runs on two tracks: the periodic distributions you receive, and the capital gain or loss when you eventually sell units. Both are governed by the Income Tax Act, with the pass-through mechanism codified in section 115UA.

Distributions are not a single homogeneous payment. A REIT or InvIT typically pays out a blend of interest, dividend, rental income (for REITs) and repayment of capital, and each component is taxed differently in your hands. The interest component is exempt at the trust level under section 10(23FC) and taxed at your slab rate; the trust deducts TDS at 10% for resident unit holders under section 194LBA. The dividend component is generally exempt in your hands under section 10(23FD), unless the underlying special-purpose vehicle has opted for the concessional corporate-tax regime under section 115BAA, in which case that dividend is taxable at your slab rate, a change introduced by the Finance Act 2020.

The repayment-of-capital component deserves attention because the Finance Act 2023 closed a long-standing gap. From assessment year 2024-25, any distribution that is in the nature of repayment of debt reduces your cost of acquisition of the units until it equals the issue price; anything received beyond that is taxed as income from other sources under section 56(2)(xii). This is why the annual statement your registrar sends now breaks the payout into components rather than showing one lump distribution.

On the sale of listed REIT or InvIT units, the capital-gains rules that took effect on 23 July 2024 apply, because units of a business trust are treated like listed equity for this purpose. If you hold for 12 months or less, the gain is short-term and taxed at 20% under section 111A. If you hold for more than 12 months, the gain is long-term: aggregate LTCG up to Rs 1,25,000 in a financial year is exempt, and the balance is taxed at 12.5% under section 112A, without the benefit of indexation. These are the same rates confirmed in Oquilia's rate configuration, and they replaced the earlier 15% short-term and 10% long-term figures from 23 July 2024. Note that STCG on these units is materially higher than the long-term rate, so holding period matters. For a broader view of how SEBI polices the wider fund universe, our note on SEBI passive fund norms covers index funds and ETFs, while the piece on SEBI's mutual-fund expense-ratio slabs explains how costs are capped across pooled products.

Who Should Pick Which

The choice between a REIT and an InvIT is less about the SEBI plumbing, which is now nearly identical after the 2019 one-unit trading lot, and more about the cash flows and risks you want in your portfolio. Both distribute at least 90% of cash flow at least twice a year, so both suit an investor who values regular income over pure capital growth.

A REIT tends to fit an investor who wants exposure to commercial real estate rentals without the Rs 50 lakh-plus ticket, illiquidity and tenant-management headache of buying an office floor outright. With a one-unit trading lot since 23 April 2019, you can build a position gradually, and the underlying rent escalations (commonly 5% or so annually written into commercial leases) offer a partial inflation hedge. If you are comparing this against a systematic equity plan, the Oquilia SIP calculator and lumpsum calculator let you line up expected REIT yields against equity-fund projections side by side.

An InvIT suits an investor who prefers the steadier, contract-backed cash flows of operating infrastructure, power-transmission availability charges or toll collections, and who is comfortable that many of these assets have finite concession lives. Because a chunk of an InvIT distribution is often a return of capital as the underlying asset amortises, the headline yield can look higher than a REIT's, but part of it is your own capital coming back, now tracked precisely under the Finance Act 2023 rules effective from assessment year 2024-25. Conservative income seekers, retirees drawing a monthly-style cash flow, and investors diversifying away from bank fixed deposits are the natural audience for both, provided they accept market-price volatility that a fixed deposit does not carry. Those wanting an even newer pooled structure between mutual funds and PMS can read our explainer on SEBI's Specialized Investment Funds framework.

FAQ

What is the minimum amount I need to buy a REIT or InvIT today?

At the initial public offer, the SEBI circular of 23 April 2019 sets the minimum application value in a band of Rs 10,000 to Rs 15,000 for REITs and Rs 1,00,000 to Rs 1,50,000 for InvITs, with the exact figure fixed by the merchant bankers within that band for each issue. On the stock exchange after listing, the trading lot is one unit, so you can buy a single unit at its market price through any demat account.

How is the trading lot different from the bidding lot?

The bidding or subscription lot applies only at the IPO, when you apply through ASBA or UPI for a minimum value inside the SEBI-mandated band. The trading lot applies on the secondary market and, since the 23 April 2019 circular, is a single unit for both REITs and InvITs, down from about Rs 1 lakh for REITs and Rs 5 lakh for InvITs earlier.

How is capital gains tax charged when I sell REIT or InvIT units?

Units of a business trust are treated like listed equity. If sold within 12 months, the short-term gain is taxed at 20% under section 111A. If held beyond 12 months, long-term gains up to Rs 1,25,000 a year are exempt and the balance is taxed at 12.5% under section 112A, both rates effective from 23 July 2024, with no indexation.

Is the income I receive from a REIT tax-free?

No. A distribution blends interest, dividend, rent and repayment of capital. Interest is taxed at your slab rate with 10% TDS under section 194LBA; dividend is exempt under section 10(23FD) unless the SPV opted for section 115BAA; and repayment of capital adjusts your cost of acquisition, with any excess taxed under section 56(2)(xii) from assessment year 2024-25.

How often are distributions paid?

Under both the SEBI (REIT) Regulations 2014 and the SEBI (InvIT) Regulations 2014, at least 90% of net distributable cash flow must be distributed to unit holders at least twice a year. Many trusts pay quarterly in practice, but the regulatory floor is semi-annual.

Are REITs and InvITs safer than direct property or equity?

They are neither risk-free nor identical to a fixed deposit. Because at least 80% of a publicly offered trust's value must sit in completed, income-generating assets under the 2014 regulations, cash flows are relatively predictable, but the units trade on the exchange and their price fluctuates with interest rates and demand, unlike a bank deposit that returns your principal at par.

Where can I verify these rules myself?

The authoritative sources are the SEBI circular SEBI/HO/DDHS/DDHS/CIR/P/2019/59 dated 23 April 2019 on sebi.gov.in for lot sizes, and the Income Tax Act provisions on incometax.gov.in for sections 115UA, 10(23FC), 10(23FD), 111A and 112A. Always confirm the exact minimum application value in the specific offer document, as it is set within the SEBI band for each issue.