Pre-Leased Commercial vs REITs in FY25: The Post-Budget Math Has Changed

Budget 2025s REIT distribution tax change re-rated the relative attractiveness of direct pre-leased commercial vs listed REITs.

The Setup

REIT distributions now taxed as income from other sources at slab. Direct pre-leased commercial: cap-rate income plus capital appreciation, with tax-efficient routes.

The Math

REIT at 7.0% gross approximates to 4.8% post-tax (HNI slab). Direct pre-leased Grade-A at 7.6% gross approximates to 6.1% post-tax (depreciation shield). Plus 6-8% pa appreciation.

Worked Example

Rs 5cr into direct pre-leased Hyderabad Gachibowli (7.6% cap) = Rs 38L gross / Rs 30L post-tax plus capital appreciation Rs 35-45L. Total IRR 13-15%.

Investor Checklist

Lease tenor over 7 years. Tier-1 tenant. Lock-in over 5 years. CAM/maintenance pass-through. Stamp-duty depreciation route via separate entity.

EstateVeda Verdict

For HNI/family-office allocation over Rs 3cr, direct pre-leased Grade-A commercial now decisively beats REITs on post-tax IRR.