Edelweiss Nifty REITs & Realty Index Fund is open for subscription. Should you invest?

Edelweiss Mutual Fund has launched India's first REITs-oriented index fund NFO - Edelweiss Nifty REITs & Realty Index Fund, which is open for subscription and will close on August 19.

This fund offers investors with exposure to a portfolio of listed Real Estate Investment Trusts (REITs) and leading real estate companies through a single investment. The fund house describes this fund as - from skyline to portfolio, the new way to invest in Indian real estate.

The fund aims to mirror the returns of Nifty REITs & Realty Total Return Index, subject to tracking error and at present, the composition of the index construct is nearly 60% in Indian REITs and 40% in realty stocks.

According to Edelweiss Mutual Fund, the fund is suitable for investors who are seeking long-term capital appreciation and want returns that are in line with the performance of the Nifty REITs & Realty Total Return Index, subject to tracking errors.

The fund doesn’t provide exposure to InvITs because of the current regulatory framework governing passive funds. REITs are classified as equity instruments, whereas InvITs are treated as hybrid instruments. Combining the two would change the nature of the product from an equity index fund to a hybrid index fund, which is currently not permitted under SEBI's regulations for passive funds.

Vishal Dhawan, Founder & CEO, Plan Ahead Wealth Advisors shared with ETMutualFunds that this fund is a satellite allocation tool, where an investor can consider investing 5% to 10% of a well-diversified portfolio and it plays a unique dual role by bridging income stability and capital growth by combining yield-backed distributions of commercial REITs with the equity growth upside of property developers.

Dhawan further said that broad market funds hold less real estate exposure. If an investor wants exposure to India's commercial and residential real estate expansion, this index fund gives an allocation that combines both REIT rental yields (60%) and developer growth (40%).
So buying REITs directly in a demat account requires evaluating individual REITs and managing tax reporting on quarterly cash payouts and this index fund simplifies everything into a single SIP or lump-sum vehicle, combining listed REITs and developer stocks under one vehicle.

Radhika Gupta, MD & CEO, Edelweiss Mutual Fund told ETMutualFunds that this fund is meant for investors looking to add dedicated exposure to the listed real estate sector as part of a long-term portfolio and it combines the income potential of REITs with the growth opportunity of listed real estate companies.
The right allocation depends on an investor's overall portfolio, financial goals and risk appetite. Investors should decide this in consultation with their financial advisor.