An InvIT is a SEBI-regulated trust that pools investor money into operational infrastructure assets — toll roads, power-transmission lines, gas pipelines, fibre networks — and distributes ≥90% of cash flows quarterly. It is the infrastructure cousin of a REIT and offers 7-10% blended yields, higher than REITs because infra cash flows are contractual and longer-dated.
Worked INR example
IndiGrid InvIT (power-transmission) trades around ₹140/unit with annual DPU (Distribution Per Unit) of ₹14 → ~10% yield. The bulk is interest income (taxed at slab) and capital repayment (tax-deferred return of capital that reduces cost basis). On 5,000 units (₹7 lakh) you receive ~₹70,000/year. PowerGrid InvIT and India Grid Trust are the main listed publicly-offered InvITs; multiple privately-placed InvITs serve only institutional investors.
When to use
- 5-10% portfolio allocation for steady, infrastructure-backed cash flow
- Long-horizon investors comfortable with regulatory / counterparty risk (toll concessions)
- Income-laddering alongside REITs and bonds
SEBI caveat
SEBI InvIT Regulations 2014 mandate quarterly distributions, transparent quarterly factsheets, and credit ratings. Interest component is fully taxable; ROC (return of capital) reduces cost. NRIs allowed since 2019; FATCA/CRS reporting applies.
Related terms: REIT, Credit Rating, YTM.