SM REITs: A simple approach to make money from renting out property with little investments

By Bricksnwall | 2025-11-30

Want to make money from renting out your property without having to deal with tenants? REITs pay out money on a regular basis without the need to maintain properties.

If you want to make money from renting without having to acquire and manage property, SM REITs (little and Medium REITs) are a good option. They offer constant payouts and little gains without the stress of dealing with tenants or physical assets.

SM REITs work like regular REITs in that they combine investors' money to buy and manage real estate that makes money. The main distinction is size: large REITs own portfolios worth more than ₹500 crore, while SM REITs only own assets worth between ₹50 crore and ₹500 crore. This makes them much easier to get to, since the least amount of money you can invest is ₹10 lakh.

You don't own a property directly; instead, you put money into the SM REIT, which owns and operates things like office buildings, stores, warehouses, logistics centers, and hospitals. SM REITs usually focus on small to medium-sized buildings that are good for small and medium-sized businesses.

Returns are usually constant and moderate, ranging between 9% and 12%. This makes SM REITs a good choice for investors who want steady income and safety for their capital instead of big gains from growth and expansion.

The Bad Side

SM REITs have some great benefits, but they also come with some risks. Changes in property values can change the price of a REIT unit. Since REITs are a novel type of investment, their long-term success is yet unknown.

Before putting money into something, retail investors should do a lot of research. This means looking at the REIT's financial accounts, understanding its strategy, judging the quality of its properties, and looking at the overall status of the market. It's just as necessary to carefully read offer documents and look at the characteristics of the assets, the expected yields, and the Net Asset Value (NAV) disclosures.

Investors need to know the main distinction between REITs and mutual funds. With T+1 or T+2 redemption, mutual funds let you get your money immediately with little expense. But SM REITs don't have much liquidity, so it could take weeks or months to find a buyer, and hasty exits often mean selling at a discount, which lowers returns. In summary, you can get your money back from a mutual fund in a day or two, but it usually takes much longer to get out of a REIT investment.

Taxation is also different: REIT income is taxed based on its parts, interest is taxed at the investor's slab rate, dividends may not be taxed, and amortization is subtracted from capital gains.

Source: Hindustan Times