According to Edelweiss Mutual Fund Managing Director and CEO Radhika Gupta, that isn’t the case.
In a post on X, Gupta said REITs are classified as equity by the Securities and Exchange Board of India (SEBI) and tend to behave much more like equities than debt instruments, even though they generate regular cash flows.
Let me bust a REIT myth: REITs are not fixed income. There is a reason SEBI classifies them as equity.
Consider the numbers. Equity market volatility in India has typically been around 14–16% (depending on the time period). A pure-play REIT index has exhibited volatility of… https://t.co/7LEiNguBg5 pic.twitter.com/JbqHwnRMCs
— Radhika Gupta (@iRadhikaGupta) August 4, 2026
Why REITs aren’t like fixed-income investments
Many investors associate REITs with fixed income because they distribute a significant portion of their rental income to unitholders. While these regular payouts may resemble interest income, the value of REIT units fluctuates based on market conditions, making them fundamentally different from debt products.
Gupta noted that a pure-play REIT index has historically exhibited volatility of around 10-11%, compared with roughly 14-16% for the broader equity market. Although REITs have been slightly less volatile than equities, they remain significantly more volatile than fixed-income instruments, arbitrage funds and many hybrid funds.
Globally too, listed REITs have shown equity-like behaviour, with long-term performance moving in tandem with broader equity markets, she said.
What drives REIT returns?
Unlike traditional equities, where returns are driven largely by earnings growth, REITs derive a substantial portion of their returns from recurring rental income generated by commercial properties.
According to Gupta, REIT yields are typically around 5-6%, higher than the dividend yield offered by the broader equity market. Investors, however, can also benefit from capital appreciation if the value of the underlying real estate assets rises.
That said, REIT prices are influenced by factors different from those affecting most listed companies. Interest rate movements, occupancy levels, lease renewals, commercial property demand and rental growth all play an important role in determining returns.Where do REITs fit in a portfolio?
Rather than viewing REITs as an alternative to fixed deposits or bonds, Gupta said investors should consider them as a diversification tool.
REITs provide exposure to income-generating commercial real estate through a listed and liquid investment vehicle, allowing investors to participate in an asset class that would otherwise require significant capital to access directly.
From a portfolio perspective, they are closer to other real assets, such as gold, than to traditional debt investments, she argued.
What should investors keep in mind?
While REITs can offer regular distributions and diversification benefits, they remain market-linked investments. Their prices can rise or fall depending on interest rates, property market conditions and overall investor sentiment.
For investors seeking exposure to commercial real estate without directly owning property, REITs can provide an accessible route. However, experts say they should be viewed as part of the equity allocation in a portfolio—not as a substitute for fixed-income investments.
