REITs, small-cap real estate stocks outperform as sector rebounds; what investors should note

India’s real estate sector is staging a strong comeback, with small-cap real estate companies leading the charge. Over the past 12 months, small-cap realty stocks have delivered an impressive 17% return, significantly outperforming the broader Sensex, which edged up by just 1.4% in the same period, according to financial services firm Equirus Securities.

In contrast, large-cap real estate firms saw negative returns of –2.9%, reflecting a divergence in investor preference for nimble, growth-oriented companies over heavyweight players. REITs (Real Estate Investment Trusts) followed closely behind small caps, delivering 15.2% returns, while mid-cap realty companies returned 2.5%.

“Small-cap real estate companies have been the best-performing segment in the past 12 months, followed by REITs, mid-cap players, and the benchmark Sensex. Large-cap firms lagged with negative returns,” noted the Equirus report.

This isn’t a one-off phenomenon. Since March 2021, small-cap realty stocks have consistently outperformed their mid- and large-cap peers, reflecting investor confidence in emerging, flexible companies poised to benefit from rising demand, rapid urbanization, and infrastructure push.

REITs, though delivering lower cumulative returns over the longer term, have provided investors with a more stable path to real estate exposure. Their popularity continues to rise, especially among first-time and small-ticket investors.

REITs dominate

Equirus’ analysis also highlights the growing role of REITs in real estate capital markets. Since FY18, Indian real estate entities have raised a total of Rs 72,331 crore through primary markets, with REITs alone accounting for Rs 31,241 crore, 43% of the total.

The last 12 months have seen a sharp uptick in fundraising, with Rs 26,000 crore raised, signaling renewed investor interest supported by regulatory reforms and a robust infrastructure pipeline.

REITs offer a relatively accessible way to invest in premium commercial real estate—such as office parks and tech campuses—without requiring property ownership. Units of listed REITs like Embassy REIT or Brookfield India REIT can be bought with a modest investment. Some mutual funds and platforms even allow SIPs starting at Rs 100–Rs 500, making it easier for retail investors to enter.

Warehousing sees growth

Parallel to the rise of REITs and small-cap firms, India’s warehousing sector has undergone a remarkable transformation. Since 2019, warehousing stock in Tier 1 cities has more than doubled—from 213 million sq. ft. to 438 million sq. ft. in 2024. Across India, total warehousing stock reached 533 million sq. ft. this year.

This boom is driven by factors such as the explosive growth of e-commerce, improved logistics infrastructure via the Gati Shakti initiative, and reforms like GST and the Unified Development and Finance (UIDF) scheme. Today, nearly 60% of warehousing demand originates from non-metro regions.

Grade A warehouses—offering modern infrastructure and regulatory compliance—are driving this trend, accounting for 80% of new absorption in Tier 1 cities and 30% in emerging ones.

REIT investments

From booming small-cap stocks to accessible REIT investments and a rapidly growing warehousing sector, India’s real estate landscape is evolving fast. For investors, the message is clear: opportunity lies beyond traditional large caps and residential projects. With proper due diligence and a focus on fundamentals like yield, occupancy, and debt, both retail and institutional investors stand to benefit from the sector’s ongoing revival.