Introduction

Ever wondered who owns the highways you drive on, the power lines that supply electricity, or the telecom towers that keep your network running? 

Behind many of these large infrastructure projects are companies and investors who help fund and operate them.

But, before 2014, investing directly in such projects was not feasible. 

That’s where Infrastructure Investment Trusts (InvITs) come in.

Stay with us as we’ll understand what InvITs are, how they work, their benefits, risks, taxation, and how to invest in InvITs in India.

What are InvITs (Infrastructure Investment Trust)?

An Infrastructure Investment Trust (InvIT) is a SEBI-regulated investment vehicle that pools money from investors and puts it in operational infrastructure-related assets that generate regular cash flows. 

It is very similar to a mutual fund, only that it invests in infrastructure projects such as:

• Highways
• Power transmission lines
• Renewable energy projects
• Telecom towers
• Power Plants
• Gas pipelines, etc

InvITs are listed on stock exchanges, making them accessible to retail investors similar to stocks and REITs. Also, there is no lock-in required or any holding period. You can buy and sell them anytime.

Types of InvITs in India

In India, as of 2026, there are 28 InvIT trusts available, which are further categorized into Public and Private. 

1. Publicly Listed InvITs

These trusts are listed on stock exchanges and can be bought or sold by retail investors through a demat account.

2. Privately Placed InvITs

These are generally available only to institutional investors and high-net-worth individuals (HNIs).

How Do InvITs (Infrastructure Investment Trust) Work?

An InvIT structure generally involves:

1. Sponsor – Sets up the InvIT and transfers infrastructure assets into it.
2. Trustee – Holds the InvIT’s assets for the benefit of unit holders.
3. Investment Manager – Manages investments and makes operational and financial decisions.
4. Project Manager – Responsible for execution, operations, and maintenance of infrastructure projects.

Based on their roles, here’s how they handle investor’s money at the backend:

Stage 1 - Investors Invest in InvIT Units 

Investors invest in the InvIT by purchasing its units through an IPO or from the stock exchange. 

Stage 2 - InvIT Invests in Infrastructure Assets 

The InvIT invests directly or through SPVs (Special Purpose Vehicles) in infrastructure-related assets such as: 

• Operational highways
• Power transmission assets
• Renewable energy projects
• Telecom towers
• Gas pipelines, etc.

InvITs may also invest a limited portion in:

• Under-construction infrastructure projects
• Debt instruments of infrastructure companies
• Government securities
• Money market instruments
• Liquid mutual funds or cash equivalents

Publicly listed InvITs are generally required to invest the majority of their assets in completed and revenue-generating infrastructure projects.

Stage 3 - Income Distribution to Investors 

The infrastructure assets generate revenue through toll collections, transmission charges, lease rentals, power purchase agreements, or similar cash flows

A substantial portion of this income is distributed periodically to unit holders in the form of interest, dividends, or repayment of capital.

How Are Returns Generated From InvITs?

Most InvITs in India earn revenue through:

• Toll collections
• Power transmission charges
• Lease rentals
• Usage (gas or electricity) fees
• Long-term infrastructure contracts

Since these assets typically generate stable cash flows, InvITs are often considered income-generating investment options. This income earned by the InvIT is then distributed to unitholders. 

As per SEBI guidelines, at least 90% of the net distributable cash flow (NDCF) must be distributed to unitholders in the form of Dividends, Interest, & Return of Capital.

Benefits of Investing in InvITs

Here are some benefits of investing in InvITs:

• Lower Investment Barrier

Retail investors can participate in large-scale infrastructure projects with relatively smaller investments. It is usually ₹10,000 to ₹ 15,000, and the trading lot is 1 unit. Earlier, prior to 2021, this limit was ₹1 lakh. 

• Exposure to Infrastructure 

Investors get access to sectors like transportation, renewable energy, and utilities without directly owning infrastructure assets.

• Regular Income Potential

InvITs distribute a significant portion of their cash flows to investors, making them suitable for those seeking passive income opportunities.

• Portfolio Diversification

They help diversify investment portfolios beyond traditional asset classes such as equities, fixed income, and mutual funds.

• Liquidity

Listed InvITs are traded on stock exchanges, allowing investors to buy or sell units during market hours, subject to market liquidity. 

How to Invest in InvITs in India?

Investors can invest in Infrastructure Investment Trusts either during a public issue (IPO/FPO) or by purchasing listed units from the stock exchange.

Here’s how you can invest in InvITs in India:

Step 1: Open a Demat and Trading Account

To invest in InvITs, you need to have a demat account.

Since these units are held in electronic form, allotment happens only in demat mode.

Step 2: Choose How You Want to Invest

Investors can invest in InvITs through:

• IPO/FPO: Apply during the public issue of an InvIT
• Stock Exchange: Buy listed units like shares from the secondary market.

Step 3: Apply Through ASBA or UPI

During a public issue:

• Applications are made through the ASBA (Application Supported by Blocked Amount) process
• The bid amount remains blocked in the bank account until allotment
• Retail investors can also apply through UPI-based applications (subject to applicable limits).

Step 4: Enter Correct Details

While applying, investors should correctly enter:

1. PAN number
2. DP ID
3. Client ID
4. Bank details

Incorrect details may lead to rejection of the application.

Step 5: Receive Allotment and Track Listing

Once units are allotted:

1. InvIT units are credited to the demat account
2. The units are then listed on the stock exchange, where investors can buy or sell them like stocks

Before investing, investors should evaluate factors such as distribution yield, asset quality, sponsor credibility, and associated risks.

Taxation of InvITs in India

In 2026, InvITs are taxed in India depending on the type of income distributed to investors. Different components of distributions may be taxed differently in the hands of investors.

Here’s how much tax you could pay on InvITs in India:

Difference Between InvITs and REITs

Both InvITs and REITs are market-linked investment products that provide income distribution opportunities. But, they do they have their pros and cons.

Let’s see the difference between InvITs and REITs:

Conclusion

InvITs offer a simple way for investors to participate in India’s growing infrastructure sector without directly owning large infrastructure assets. They combine the potential for regular income with exposure to sectors like roads, power, renewable energy, and telecom infrastructure.

For investors looking to diversify their portfolio and explore market-linked income opportunities, they can be an interesting option. 

However, like any investment, they also come with risks related to markets, regulations, and asset performance. 

Understanding how InvITs work in India, their returns, and taxation can help investors make more informed investment decisions.