YIELD-GENERATING ASSET CLASSES IN INDIA

A Comprehensive Analysis of REITs, InvITs, and Bond Instruments

Submitted by:
Pawan Kumar Agrawal
Roll No.: 180087 | Section: B

Guided by:
Prof. Ranjit Tiwari

2026
Table of Contents
TOC \h \o "1-3"
1. Introduction to Yield-Generating Assets
Yield-generating assets are investment instruments that provide regular income to
investors in the form of dividends, interest, or rental income. In the Indian market,
three primary categories have emerged as attractive options for investors seeking
steady cash flows: Real Estate Investment Trusts (REITs), Infrastructure Investment
Trusts (InvITs), and Bond Instruments. These asset classes offer unique
characteristics, risk-return profiles, and regulatory frameworks that cater to different
investor needs.
This comprehensive analysis examines the structure, performance, and investment
characteristics of these asset classes, providing detailed data and comparative
insights to help investors make informed decisions.

1.1 Indian Market Overview

The Indian yield-generating assets market has grown significantly in recent years,
with increasing institutional and retail participation. The following table presents the
current market landscape:

Asset Class Market Size (₹ Listed Units Avg. Yield (%)

Cr)
REITs 55,000 3 6.5-7.5
InvITs 1,25,000 9 7.0-8.5
Corporate Bonds 40,00,000 1,200+ 6.0-9.5
Government Securities 75,00,000 450+ 6.5-7.3
2. Real Estate Investment Trusts (REITs)
Real Estate Investment Trusts (REITs) enable investors to pool capital for
investment in income-generating real estate assets. Introduced in India through SEBI
(Real Estate Investment Trusts) Regulations, 2014, REITs provide retail investors
access to institutional-grade real estate with lower capital requirements and higher
liquidity compared to direct property ownership.

2.1 Regulatory Framework

Regulatory Parameter Requirement

Minimum Asset Allocation Minimum 80% of total assets
(Completed Properties)
Other Permissible Investments Up to 20% in under-construction
properties, listed equity shares, debt
securities, and liquid assets
Mandatory Distribution (NDCF) Minimum 90% of Net Distributable Cash
Flow to unitholders
Distribution Frequency At least semi-annually (most REITs
distribute quarterly)
Leverage Limit Maximum 49% of asset value (can be
increased to 70% with investor
approval)
Minimum Issue Size ₹500 crores
Minimum Application Amount ₹10,000 to ₹15,000 per unit (varies by
REIT)
Small & Medium REITs (SM REITs) Fractional ownership platform; minimum
investment ₹50 lakhs; unlisted structure

2.2 Listed REITs in India

As of 2024, India has three publicly listed REITs on the stock exchanges. The
following table provides detailed information about each REIT:

REIT Name Launch Year AUM (₹ Cr) Yield (%) Properties

Embassy Office 2019 33,500 6.8 14 parks
Parks REIT
Mindspace 2020 14,200 7.2 5 parks
Business Parks
REIT
Brookfield India 2021 7,300 7.5 4 parks
REIT
3. Infrastructure Investment Trusts (InvITs)
Infrastructure Investment Trusts (InvITs) are designed to mobilize investments in
infrastructure projects such as roads, power transmission, telecommunications
towers, and energy distribution networks. Regulated under SEBI (Infrastructure
Investment Trusts) Regulations, 2014, InvITs provide investors with exposure to
operational infrastructure assets that generate stable cash flows through user fees
and long-term contracts.

3.1 Regulatory Framework and Structure

Regulatory Parameter Requirement

Sponsor Minimum Holding Minimum 15% of total units for at least 3
years from listing
Asset Allocation (Completed Minimum 80% in completed and
Projects) revenue-generating infrastructure
projects
Under-Construction Projects Up to 10% of total assets
Mandatory Distribution (NDCF) Minimum 90% of Net Distributable Cash
Flow to unitholders
Distribution Frequency At least twice annually; most distribute
quarterly
Leverage Limit Maximum 70% of asset value
Minimum Issue Size ₹500 crores
Eligible Infrastructure Sectors Roads, power transmission, gas/oil
pipelines, telecom towers, ports,
airports, SEZs

3.2 Listed InvITs in India (Major Players)

InvIT Name Sector AUM (₹ Cr) Yield (%) Assets
IndInfravit Trust Roads 30,200 7.8 8 BOT roads
India Grid Trust Power 24,600 8.2 13 lines
Transmission
IRB InvIT Fund Roads 18,400 7.5 11 TOT
roads
PowerGrid InvIT Power 22,500 8.1 12 assets
Transmission
Brookfield India Data Centers 8,800 7.3 3 facilities
Real Estate Trust
4. Government Securities and Bond Instruments
Government securities represent debt obligations issued by the central or state
governments to finance fiscal deficits and development projects. These instruments
are considered the safest investment option in India due to sovereign guarantee,
making them benchmark instruments for risk-free returns.

4.1 Types of Government Securities

Instrument Tenure Current Yield Risk Level Liquidity

Type
Treasury Bills 91 days 6.75% Very Low High
(91-day)
Treasury Bills 182 days 6.85% Very Low High
(182-day)
Treasury Bills 364 days 6.95% Very Low High
(364-day)
10-Year G-Sec 10 years 7.10% Very Low High
(Fixed Coupon)
Floating Rate Variable NSC+0.35% Very Low Medium
Bonds (FRB)
State 5-30 years 7.25-7.50% Low Medium
Development
Loans

4.2 Corporate Bond Market and Credit Ratings

Corporate bonds are debt instruments issued by private sector companies and public
sector undertakings to raise capital. Credit rating agencies assess the
creditworthiness of issuers, providing investors with risk indicators. The following
table outlines the credit rating framework used in India:

Rating Safety Level Credit Risk Yield Range

AAA Highest Safety; Very Low 6.0-6.5%
Extremely Strong
Capacity
AA High Safety; Strong Very Low 6.5-7.2%
Capacity
A Adequate Safety; Low to Moderate 7.2-8.0%
Sufficient Capacity
BBB Moderate Safety; Moderate 8.0-8.8%
 Vulnerable to Changes
BB/B Speculative; Significant High 9.0-12.0%
Risk
C/D Default/Highly Extremely High 12%+
Speculative
5. Comparative Analysis and Investment Considerations
5.1 Risk-Return Comparison

Parameter REITs InvITs Corp Bonds G-Secs

Average Yield 6.5-7.5% 7.0-8.5% 6.0-9.5% 6.5-7.3%
Credit Risk Low- Low- Variable Nil
Moderate Moderate
Liquidity High High Medium Very High
Min. Investment ₹10-15K ₹1 lakh+ ₹10K-1L ₹10K
Tax Treatment As per slab As per slab As per slab As per slab
Price Volatility Moderate Moderate Low- Low
Moderate

5.2 Investment Suitability Matrix

Investor Profile Recommended Asset Rationale
Class
Conservative (Low Risk Government Securities Sovereign guarantee,
Tolerance) (G-Secs), AAA Corporate stable returns, high
Bonds liquidity
Income-Focused InvITs, REITs Quarterly distributions,
(Regular Cash Flow) 90% mandatory payout,
stable yields
Growth-Oriented (Capital REITs Real estate appreciation
Appreciation) potential, rental
escalation clauses
Inflation Hedge Seekers REITs, InvITs Rental income/toll
revenue indexed to
inflation
Tax-Efficient Investors Balanced mix of all All taxed as per income
classes slab; diversification
reduces concentration
risk

6. Conclusion
Yield-generating assets in India offer diverse opportunities for investors seeking
regular income and portfolio diversification. REITs and InvITs have democratized
access to real estate and infrastructure investments, providing institutional-quality
assets with strong governance and transparency. Government securities and
corporate bonds continue to serve as foundational components of fixed-income
portfolios, offering varying risk-return profiles based on issuer creditworthiness.
The choice among these asset classes should be guided by individual investment
objectives, risk tolerance, income requirements, and time horizon. Conservative
investors may prefer government securities for capital preservation, while those
seeking higher yields and inflation protection might allocate to REITs and InvITs. A
well-diversified portfolio incorporating multiple yield-generating instruments can help
investors achieve their financial goals while managing risk effectively.
As the Indian capital markets continue to evolve, regulatory enhancements and
increased investor awareness are expected to drive further growth in these
segments, creating expanded opportunities for both retail and institutional investors
to participate in India's economic development story while earning attractive risk-
adjusted returns.