6 Alternative Options To Invest In Real Estate Without Buying The Property

What comes to your mind when you think about buying a property or land? A big fat bank account with at least Rs 50-70 lakhs, or maybe even Rs 2-3 crores?

But what if we told you that gone are the days when tapping into real estate meant locking such huge chunks of money into a single land or building?

Thanks to the changing landscape of India’s real estate industry, especially in the last decade or so, you can now invest in real estate with as little as a few hundred or thousand rupees!

Sounds interesting? Well, check out our latest blog as we dig deep to bring to you the list of some alternative ways in which you can invest in real estate beyond the traditional method of putting lakhs or crores of money to buy the physical asset.

1. Real Estate Investment Trusts (REITs) & SM REITs

• REITs

Think of Real estate investment trusts (REITs) like mutual funds, but for real estate – You invest in a REIT, which then invests in commercial properties that generate rental income. REITs give investors access to ownership of high-quality real estate assets in small ticket sizes. They are listed on the stock exchanges and investors can buy REIT units just like they would buy shares of any listed company. REITs manage the portfolios of high-value real estate properties and mortgages.

For instance, they lease properties and collect rent thereon. Then this collected rent gets distributed among shareholders as income and dividends later on.

You can start investing with an amount as low as Rs 100-500 for one unit of the REIT, and can expect returns of around 11%-16%. You can invest through apps such as Zerodha’s Kite, Groww, Smallcase, etc.

(Some REITs listed on Smallcase app, as on 28 October 2025)

As far as taxation is concerned, here’s how REITs are taxed:

Income Type	Tax Rate/Rule	Notes/Conditions
Short-Term Capital Gains (STCG)	20%	Applies if holding period ≤ 12 months
Long-Term Capital Gains (LTCG)	12.50%	Applies if holding period > 12 months; tax on gains exceeding ₹1.25 lakh
Interest Income	Taxed at slab rates	Subject to individual's income tax slab
Rental Income	Taxed at slab rates	Subject to individual's income tax slab
Dividend Income	Tax depends on SPV's tax regime choice	Varies by chosen tax regime of Special Purpose Vehicle (SPV)
TDS on Interest/Rental Income	10%	Levied if interest/rental income exceeds ₹10,000

• SM REITs

Within the REITs framework, there is an interesting subclass which has been gaining traction in recent years, i.e. SM REITs (Small and Medium Real Estate Investment Trust).

While REITs are designed for large-scale and diversified real estate investments made accessible to retail investors with small ticket sizes at lower risk, SM REITs work a bit differently.

SM REITs target mid-sized assets in emerging markets with higher entry barriers (min investment amount of ₹10 lakh), offering potentially higher yields but with greater concentration risk and lower liquidity. A key aspect is that SM REITs bring the previously unorganized fractional ownership models under SEBI regulation.​

The taxation rules for SM REITs are the same as those of traditional REITs.

India’s market regulator SEBI had introduced SM REITs in March 2024 to formalize and regulate the fractional ownership space, which helps in providing investor protection while unlocking India's vast mid-segment real estate market. You can invest in SM REITs through platforms such as Propertyshare and hBits.

You can also check out the SEBI-registered SM REITs and REITs in India here:

SM REITs: https://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognisedFpi=yes&intmId=48

REITs: https://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognisedFpi=yes&intmId=42

Also, here’s a comparative table to help you further understand the differences between REITs and SM REITs:

Basis	REITs	SM REITs
Minimum Investment	Rs 100-Rs 500	Rs 10 lakh
Asset Size	Minimum Rs 500 crore per REIT ​	Rs 50 crore-Rs 500 crore per scheme
Property Type	Majorly invest in large-scale, institutional-quality commercial properties (skyscrapers, IT parks, large malls) ​	Majorly invest in small to mid-sized commercial properties (standalone office buildings, warehouses), and sometimes residential real estate
Diversification	Invest across multiple property types and locations, hence lower concentration risk	Focused on single or fewer properties, hence a higher concentration risk than traditional REITs
Liquidity	Highly liquid due to their larger, diversified portfolios and greater market visibility	Lower liquidity as their trading volumes tend to be lower than traditional REITs due to smaller scale and market familiarity
Scheme Structure	Cannot create multiple schemes (investment pools) under one REIT ​	Can launch multiple schemes under one SM REIT (like mutual funds) ​
Investment Requirement	80% in completed and revenue-generating properties; 20% under construction allowed ​	95% in completed and rent-generating properties only ​
Income Distribution	90% of net distributable cash flow ​gets distributed to unitholders	100% of net distributable cash flow  gets distributed to unitholders
Co-investment	Permitted ​	Not permitted ​
Target Audience	Retail investors, institutions, FPIs ​	HNIs, family offices, NRIs, professionals ​
Taxation	Same for REITs and SM REITs

2. Infrastructure Investment Trusts (InvITs)

In simple terms, InvITs (Infrastructure Investment Trusts) are similar to specialized or sectoral mutual funds which pool in your money to invest majorly in cash-generating or under-construction infrastructure projects like dams, highways, railway projects, transformers, power grids, etc.

The main objective of InvITs is to open the doors for retail investors to access investment opportunities in infrastructure projects that were previously only available to large institutional investors.

For InvITs specifically, you can invest by buying and selling them in a similar manner to equities, since InvITs are listed on the NSE/BSE, where the units can be traded. You can invest through apps such as Zerodha’s Kite, Groww, Smallcase, etc.

Here’s the list of SEBI-approved InvITs in India: https://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognisedFpi=yes&intmId=20

(Some InvITs listed on Smallcase app, as on 28 October 2025)

There is no minimum set amount to invest in InvITs, and you can start with as low as Rs 60-100 for one unit of the InvIT, and can expect returns of around 8%-15%

Income Type	Taxation Rules	TDS Conditions
Interest Income	Taxed as per individual’s applicable slab rate	10% TDS if interest distributions exceed ₹10,000 in a financial year
Dividend Income	Exempt if underlying SPV has NOT opted for concessional tax under Section 115BAA; Taxable at slab rate if opted under 115BAA	10% TDS if dividend distributions exceed ₹10,000 annually
Short-Term Capital Gains (STCG)	Taxed as per individual’s slab rate if holding ≤ 36 months	N/A
Long-Term Capital Gains (LTCG)	Taxed at 10% without indexation if holding > 36 months	N/A
Rental Income	Taxed as per individual’s slab rate	10% TDS if rental income exceeds ₹10,000 annually

3. Fractional Ownership

Through fractional ownership, you can invest in real estate without letting your bank account take a huge hit. As its name suggests, fractional ownership refers to partial ownership of a property, wherein investors pool in their capital to invest in a physical property.

This model offers a middle ground to investors who want to own a share of premium assets like vacation villas, second homes, or pre-leased commercial spaces without having to bear the full and hefty cost of ownership.

So, how does the entire process of fractional real estate (FRE) ownership work? Well, the asset manager (the fractional real estate platform) sets up a separate entity – an SPV (Special Purpose Vehicle) – which is a legal entity that pools in investor's funds. The SPV can be a private limited company or an LLP.

In case the SPV is structured as a private limited company, investors become partial equity and partial debenture holders of this company. based on their investment amount.

On the other hand, in case the SPV is structured as an LLP, investors will become partners in this LLP.

Now, how do you, as an investor, earn returns? Well, in two ways – rental yield and property appreciation.

Firstly, the rental yield being generated from your property is distributed to you (along with other investors) over your entire investment period, in proportion to your original investment. The asset manager (the FRE platform) manages the investment portfolio, legal work, tenants, and property maintenance for a fee based on the overall transaction.

Secondly, at the end of the investment period, the FRE platform sells the property if a good enough opportunity arises, and then your share of profit gets distributed to you as per your investment proportion.

To give you a fair idea, here is an example of a property listed on FRE platform Claravest:

As far as the taxation of rental yields is concerned, it depends upon the type of SPV model:

Income Type	SPV Structure	Tax Rate / Treatment	TDS Rate & Conditions
Rental Yield	LLP	Taxed at 30% corporate tax rate	Not applicable
Rental Yield	Private Limited Company (Pvt Ltd)	Taxed as 'Income from Other Sources' in investor hands per slab rate	10% TDS for Indian residents on rent > ₹10,000; 20% or per DTAA for NRIs with TRC
Short-Term Capital Gains (STCG)	Any	Taxed as per applicable slab rate if holding ≤ 2 years	N/A
Long-Term Capital Gains (LTCG)	Any	Taxed at 12.5% without indexation if holding > 2 years	N/A

You can start investing with a minimum amount of Rs 1-10 lakh, and can expect returns around 8%-17%, through FRE platforms such as Claravest and Fracspace.

4. Tokenisation

Another interesting way to tap into the real estate investment market is through the concept of tokenisation. This concept combines fractional real estate investment with modern blockchain technology to offer a new investment opportunity. But how? Well, let's dig deep to explain this to you.

Tokenization in real estate refers to the process of converting ownership or investment rights of a property into digital tokens that exist on a blockchain. Each such digital token represents a fractional share in the property, thus enabling multiple investors to collectively own high-value real estate assets with small minimum investments.

But how does all this happen?

• Firstly, a property is legally held by a Special Purpose Vehicle (SPV), then its total value is divided into a large number of digital tokens (e.g., 10,000 tokens or 1 lakh tokens).

• Each digital token represents a small share of the property, and owning each token gives the investor the right to a portion of whatever the property earns or grows in value. This includes:

-A share of the rental income the property generates (like your fraction of the monthly rent).

-A claim on any increase in the property's market value (appreciation) over time.

-Or direct ownership rights for that fraction of the property itself.

• You, as an investor, can buy multiple tokens on a digital platform (such as RealX).

• These tokens can sometimes be traded on a marketplace, so investors can sell their stake more easily than in traditional property deals.

• Investors get to receive income (like rent or profit from appreciation) in proportion to the number of tokens they hold, with all transactions transparently recorded on blockchain.​

By the way, we had done a deep dive blog separately on tokenized real estate, you can check it out here:

You can start investing with as low as Rs 5,000-50,000 from platforms such as RealX, AltDRX, PropFTX, and Ryzer. Since it's still an emerging and relatively newer alternative investment concept, it's not yet clear how much returns it broadly offers.

5. Real estate debt

Another interesting concept that has largely remained unexplored in India, especially by retail investors, is real estate debt as an asset class.

According to a report by real estate giant JLL-Propstack, India's real estate sector has a debt financing opportunity of around ₹14 lakh crore during the 2024-2026 period.

So what exactly is real estate debt? Simply put, real estate debt as an asset class involves lending money to real estate developers or builders. Such loans are backed by real estate assets, which provides security, thus reducing risk compared to equity investments in real estate.

Investors in real estate debt do not own the property but act as lenders, and receive fixed interest payments. Types of real estate debt investments include construction loans, bridge loans, etc.

Platforms like Earnnest.me are helping individual investors invest in quality, regular-paying real estate debt. However, keep in mind that historically, real estate debt investments have been a high risk category, and the market and economic conditions can also affect these investments, even though the implementation of RERA and IBC regulations a few years ago has led to a significant improvement and discipline.

The minimum investment amount in this asset class is relatively higher, and starts at around Rs 10 lakh, with returns ranging around 14%-16%. But again, keep in mind that this is an emerging and relatively newer alternative investment concept.

6. Real Estate ETFs

Real estate ETFs (Exchange-Traded Funds) track indices or baskets of real estate stocks (such as DLF, Lodha Developers and Godrej Properties) and REITs. They trade on stock exchanges such as BSE and NSE. So, instead of holding individual REIT units or stocks, you own ETF units or a basket of stocks that represent a fractional stake in an entire portfolio of real estate assets.

ETFs offer passive index tracking, and they simply replicate a specific index. For example, Motilal Oswal Nifty Realty ETF works by passively replicating the Nifty Realty Total Return Index. The ETF invests approximately 95% to 100% of its assets in the securities that make up the Nifty Realty Total Returns index, and aim to closely match its returns.

Keep in mind that investing in real estate ETFs carries risks such as interest rate sensitivity, market volatility, and industry concentration. As far as taxation is concerned, their taxation is the same as equity or debt mutual funds, depending on their underlying asset mix and how SEBI classifies them.

ETFs with 65% or more in equity instruments are classified as equity-oritiented ETFs, whereas those with less than 65% investment in equity instruments are classified as non-equity (debt oriented) ETFs.

The dividend is taxed as ‘income from other sources’ at your slab rate. 10% TDS is also applicable if total income exceeds Rs 5,000.

You can start investing with as low as Rs 500- Rs 1,000.

Conclusion

In the end, we all can agree that India’s real estate investment landscape is undergoing a major transformation. Instruments like SM REITs, InvITs, Tokenization and ETFs are unlocking opportunities for retail investors to get a slice of high value income-generating properties that were once out of reach.

Gradually, we are seeing the build up of an ecosystem that blends the stability of real estate with the liquidity and accessibility of financial markets. And with more and more regulatory frameworks coming up from SEBI’s side every year, all these alternative investment options can pave the way for a more inclusive and transparent real estate market in India, where ownership is not limited by capital anymore, and is in fact getting expanded by more and more innovation.

But as we always mention, do weigh the pros and cons of each and every asset class and platform before investing your hard earned money. Go ahead only with the one that suits your risk appetite and investment goals.

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Please note that this is an opinion blog and not an official research or investment advice. This blog aims to help retail investors make an informed decision if they are interested in real estate debt as an asset class, and neither encourages nor discourages you from investing in any particular asset class or platform.