Budget 2026 Proposes CPSE REITs to Monetize Government Real Estate Assets
In a significant move towards market-linked management of government-owned real estate, the Union Budget for the fiscal year 2026-27, presented by Finance Minister Nirmala Sitharaman on February 1, has introduced a proposal to establish Real Estate Investment Trusts (REITs) specifically for central public sector enterprises (CPSEs). This initiative aims to recycle and monetize the extensive land and property holdings of these state-owned entities, signaling a strategic shift in how public assets are managed.
Unlocking Value from Under-Utilized Prime Assets
The budget proposal focuses on monetizing large, under-utilized prime assets through REIT structures, with the objective of unlocking long-term value from mature public land holdings. By doing so, it seeks to improve balance-sheet efficiency at state-owned firms, allowing them to free up capital for other critical investments. According to the Indian REITs Association (IRA), this move reinforces the growing role of REITs in India's infrastructure and urban financing ecosystem.
Dedicated CPSE REITs are expected to accelerate capital recycling, expand access to high-quality, income-generating assets, and offer investors exposure through transparent and regulated instruments. REITs pool income-generating real estate assets such as office parks and shopping malls, enabling investors to earn a share of rental income without directly owning the properties. Under Securities and Exchange Board of India (SEBI) regulations, at least 80% of a REIT's assets must be completed and income-producing.
Expert Insights and Market Context
Bhavik Vora, partner at Grant Thornton Bharat, noted that "REITs for CPSEs have been under discussion for quite some time, and the proposal has now been highlighted in Budget 2026." He added that while the REIT structure will help CPSEs raise much-needed capital for long-term investments, a key near-term challenge will be determining fair rental values for self-owned assets.
India currently has five listed REITs: Embassy Office Parks REIT, Mindspace Business Parks REIT, Brookfield India Real Estate Trust (BIRET), Nexus Select Trust, and Knowledge Realty Trust. Among these, Nexus Select Trust is the only retail-focused REIT, while the others are commercial office trusts. According to IRA, these five REITs together have a gross asset value of more than ₹2.3 trillion.
Benefits for PSUs and Investors
The proposal enables public sector undertakings (PSUs) to free up capital from their balance sheets while retaining operational control over strategic assets. Simultaneously, it deepens the REIT market by offering investors access to stabilized, income-generating assets leased to quasi-sovereign entities. This creates a strong proposition for retail investors, asset managers, and institutional investors, while unlocking value for PSUs that own multiple commercial office properties.
All office REITs have reported growth in net operating income, occupancy, and distributions in the first half of FY26, a trend expected to continue in the second half, driven by demand from global capability centres (GCCs) and domestic occupiers.
Strengthening the Institutional Capital Pipeline
Ramesh Nair, managing director and chief executive of Mindspace Business Parks REIT, emphasized that "by reiterating REITs and InvITs as core financing instruments for infrastructure and urban growth, and by proposing dedicated REIT structures to accelerate monetization of CPSE real-estate assets, the Budget strengthens the long-term institutional capital pipeline for commercial real estate."
Nair also highlighted the relevance of continued push on digital infrastructure, including policy support for global cloud providers setting up data centres in India, noting that Mindspace REIT is currently the only listed REIT in India with an active data centre platform embedded in its portfolio.
