In her Union Budget address on February 1, Finance Minister Nirmala Sitharaman proposed to hasten the monetisation of real estate assets owned by central public sector enterprises (CPSEs) via dedicated Real Estate Investment Trusts (REITs), aiming to unlock capital in established public assets.
“Over the years, REITs have emerged as a successful instrument for asset monetisation. I propose to accelerate recycling of significant real estate assets of CPSEs through the setting up of dedicated REITs,” she reiterated.
Sitharaman noted that in the last ten years, the government has implemented various initiatives to enhance public infrastructure, including new financing mechanisms like Infrastructure Investment Trusts and REITs, as well as institutions such as NIIF and NABFID.
“We will continue to focus on developing infrastructure in cities with populations over 500,000, as well as in tier-II and tier-III cities that are emerging as growth hubs,” she added.
Currently, India 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 them, Nexus Select Trust is the only one dedicated to retail, while others focus on commercial office spaces.
“Cities are India’s engines for growth, innovation, and opportunity. Our focus will now shift to tier-II and tier-III cities, as well as temple towns that require modern infrastructure and basic amenities. This Budget aims to enhance the potential of urban areas to harness economic power by mapping city economic regions (CER) according to their growth drivers,” she said.
FM Sitharaman proposed an allocation of ₹5,000 crore per CER over five years for implementing their plans through a competitive financing mechanism tied to reforms and results.
Suprio Banerjee, Vice-President and Group Head at ICRA, stated that new financing methods, such as an Infrastructure Risk Guarantee Fund, CPSE REITs, and incentives for municipal bonds, should enhance project viability and attract private investment, facilitating a more sustainable capital expenditure cycle.
“The 11% year-on-year increase in capital outlay to ₹12.2 lakh crore will sustain momentum for infrastructure execution. Historically, the ministries of roads and railways constitute the majority of the proposed capital outlay in FY27 BE,” he noted.
He also highlighted that increased interest-free loan support to states will support project implementation in roads, water supply, urban development, and public buildings.
