Summary:
REITs and InvITs are emerging as a simpler alternative to direct property ownership for NRIs by eliminating many of the legal, tax and operational hurdles associated with real estate transactions. With SEBI's proposed reforms and evolving tax rules, listed real estate investment vehicles are becoming an increasingly attractive way for overseas investors to gain exposure to India's property market.
A recent checklist for NRIs on property deals in India ran through the usual gauntlet: currency conversion eating into returns, the NRE-versus-NRO account maze, TDS withholding on both sale proceeds and rental income, and the perennial headache of getting a Power of Attorney attested abroad and registered back home. None of this is new, but it is a useful reminder of exactly why SEBI's push to widen REIT and InvIT access to overseas investors, including the Depository Receipt proposal floated in early August 2026, is landing at the right moment.
The Direct Property Checklist, in Brief
The core friction for an NRI buying or selling physical property in India comes down to five recurring issues. Currency movement between the rupee and the investor's home currency can quietly shrink a gain that looked healthy on paper. Payment and repatriation must be routed correctly, since an NRE account allows full principal repatriation while an NRO account caps outward remittance near $1 million a year, and NRE-to-NRE settlement between an NRI buyer and NRI seller is not permitted. Buyers must withhold TDS on long-term capital gains at 12.5%, plus surcharge and cess, before the seller sees a rupee. Selling to a family member often works better through a gift, relinquishment or family settlement deed rather than a full sale deed, since it saves on stamp duty. And anyone using a Power of Attorney because they cannot be physically present needs it both attested at an Indian embassy or consulate abroad and registered with the local sub-registrar, a step that is frequently missed and can stall a transaction for months.
Where the Listed Route Removes the Friction
REITs and InvITs were built to sidestep almost every item on that list. There is no PoA to notarise because the entire transaction happens through a demat account online. There is no tenant to chase for rental TDS, since distributions arrive net of the trust's own compliance. There is no sub-registrar visit, no title search, and no succession certificate requirement at the point of sale. As of February 2026, REITs and InvITs together manage close to ₹9.5 lakh crore in assets in India, a scale that did not exist even five years ago, and SEBI's proposed Depository Receipt framework is aimed specifically at making that pool easier for NRIs and other overseas investors to tap without routing everything through a domestic demat account first.
Direct Property vs REITs and InvITs: A Side-by-Side View
| Friction Point | Direct Property | REITs / InvITs |
| Repatriation | Capped near $1 million a year via NRO route; NRE-to-NRE settlement not permitted between buyer and seller | Sale proceeds and distributions move through the same NRE/NRO demat-linked account, no separate cap specific to the asset |
| TDS on exit | Buyer withholds 12.5% on long-term gains plus surcharge and cess, refund only after filing | No withholding on unit sale; 20% STCG or 12.5% LTCG paid directly by the investor while filing |
| Power of Attorney | Needs consulate attestation or apostille abroad, then registration at the local sub-registrar; can lapse or be contested | Not required; transactions are executed directly online through the demat account |
| Rental income | Tenant deducts 30% TDS before paying rent, plus surcharge and cess | Rental component is distributed net of trust-level pass-through; taxed per the investor's own slab or the concessional rate depending on category |
| Exit liquidity | Weeks to months; depends on finding a buyer, clear title, and succession documents | Same-day, since units trade on NSE and BSE |
The Tax Picture Has Also Shifted
For FY 2025-26, long-term capital gains on listed REIT and InvIT units are taxed at 12.5% under Section 112, with short-term gains at 20% where securities transaction tax has been paid. Unlike equity shares, the ₹1.25 lakh annual exemption under Section 112A did not extend to REIT and InvIT units this year, though the Finance Act 2025 has already amended Section 115UA to bring that exemption in from FY 2026-27 onward, effectively aligning REIT and InvIT taxation with mainstream listed equity. Direct property sales by NRIs continue to attract 12.5% TDS on long-term gains at the point of sale, which is refundable only after an ITR filing, a cash-flow drag that listed units simply do not carry.
Check Out: RBI tightens Lending rules for REITs and InvITs
The Bottom Line
Nothing about the physical property checklist is going away, and for NRIs who want a flat in Pune or a plot near Lonavala, those FEMA and TDS rules still apply in full. But the gap between that process and the listed alternative is widening in favour of the latter. SEBI's regulatory attention this year points toward REITs and InvITs becoming the default first step for NRIs exploring Indian real estate, with direct ownership reserved for those who have a specific reason to want the deed.
