How Do InvITs Offer Returns To Investors?

Rajesh, a 45-year-old professional looking for a steady income, recently came across InvITs. But he found himself wondering how do InvITs offer returns to investors and whether they could truly be a better alternative to traditional fixed deposits.

He’s not alone; many investors share the same curiosity.

Let’s dive deeper to understand how InvITs work and what makes them an attractive option for income-seeking investors like Rajesh.

InvITs Returns in India

Infrastructure investment trusts are investment instruments that function similarly to mutual funds and are regulated by the Securities and Exchange Board of India.

Their units are listed on different trading platforms like the stock exchange and are a wholesome combination of both equity and debt instruments.

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How can investors earn through investment in InvITs?

Well, that’s simple.

Suppose someone like Rajesh invests Rs. 5 lakhs in an InvIT that owns toll roads nationwide then the revenue comes from every vehicle paying tolls on these roads.

This steady cash flow is pooled together, and by regulation, the InvIT is required to distribute at least 90% of its net income as dividends.

This is how InvITs offer returns to investors, through regular payouts, which in Rajesh’s case translate into an 8–10% annual return.

Besides these dividends, the units he holds are listed on the stock exchange, allowing him to benefit from potential capital appreciation if the toll collection and asset performance improve.

In short, managed by professionals, his investment offers diversification and ease without the hassle of operating infrastructure projects.

He found this investment product beneficial, especially during times of market fluctuations and increased usage risks.

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Here is the detail of how do InvITs offer returns to investors

• Regular Distributions 

Imagine an InvIT that owns a toll road. Every day, cars pay a toll to use that road, generating revenue for the trust.

The InvIT is required to take at least 90% of the cash it collects from these tolls and pay it out to you, the investor, as a regular income stream.

This is known as a regular distribution and it ensures you get a steady cash flow, similar to receiving a dividend from a company’s stock.

It’s a key reason why many investors are drawn to InvITs.

For example, if the trust earns ₹100 in a year, investors who pooled their funds are guaranteed to get at least ₹90 of that.

• Capital Appreciation 

Think of the value of your InvIT units like the value of a house. When the trust acquires a new, profitable highway or a power plant, its overall value increases.

Similarly, if the existing assets, like the toll road, become more profitable due to increased traffic, the trust’s value goes up.

This increase in the trust’s value is often reflected in a higher unit price on the stock exchange.

So, besides the regular distributions, you also have the potential for a long-term gain if you sell your units at a higher price than you bought them for.

Benefits of Investing in InvITs

Investing in an InvIT is like hiring a team of experts to manage your real estate portfolio. You don’t have to worry about the day to day operations of the projects, like fixing a pothole on a highway or negotiating contracts for a power grid.

The InvIT is run by a team of professional managers who have the expertise to handle these tasks, ensuring the assets are well-maintained and profitable.

This gives you peace of mind, allowing you to benefit from the infrastructure sector without the hassle of direct management.

How to Invest in InvITs?

Now that you know how InvITs offer steady returns through dividends and capital appreciation, let’s see how you can actually invest in them. The process is simple and quite similar to buying shares!

• Step 1: Open a Demat and Trading Account – You’ll need these to buy InvIT units listed on stock exchanges.

• Step 2: Choose the Right InvIT – Go through the listed options like PowerGrid InvIT or IRB InvIT, and review their asset quality, yield history, and sponsor credibility.

• Step 3: Check the Minimum Investment Amount – SEBI has lowered the entry point to around ₹10,000–₹15,000, making it easy for small investors to participate.

• Step 4: Invest via IPO or Secondary Market – You can subscribe to a new InvIT issue or purchase existing units through your broker.

• Step 5: Track Your Investment – Keep an eye on regular distributions, Net Asset Value (NAV), and market trends for consistent returns.

Start small, stay consistent, and let your InvIT investments work for you — building steady income over time.

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If you’re looking to invest in InvITs in India, start your journey today. Open a  Demat account with a trusted stockbroker.

Still unsure which broker to choose? Just share your details in the form below.

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Risks of Investing in InvITs

Like any investment, InvITs aren’t without downsides. The biggest risks include operational challenges that can lower income like delays, cost overruns, or reduced traffic on toll roads.

Market risks and interest rate sensitivity also affect returns; rising interest rates may increase borrowing costs for InvITs, squeezing profitability.

Regulatory changes and inflation can impact project viability and expenses, so investors should weigh these factors carefully.

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Conclusion

If you’re looking for predictable cash flow with some growth potential, InvITs can be a sweet spot in a portfolio.

It offers returns through a balanced cocktail of steady income and growth, making them a compelling choice for investors who value both reliability and upside.

Like Rajesh, you might just find they bridge the gap between traditional savings and modern wealth creation.

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FAQs

Q1. How do InvITs offer returns to investors?

InvITs provide returns mainly through regular income distributions (at least 90% of net cash flows) and potential capital appreciation of their listed units.

Q2. What kind of income can investors expect from InvITs?

Investors usually earn 8–10% annually in the form of dividends or interest payouts, depending on the performance of underlying assets.

Q3. Can InvITs units appreciate in value?

Yes. If infrastructure assets like toll roads or power plants perform well, the value of InvIT units may rise, allowing investors to book capital gains.

Q4. Who manages InvITs assets?

They are managed by professional teams who handle operations, maintenance, and contracts, ensuring profitability without investor involvement.

Q5. What risks affect InvITs returns?

Returns can be impacted by operational issues, market fluctuations, rising interest rates, regulatory changes, or lower-than-expected usage of infrastructure projects.