The insurance regulator is currently reviewing a proposal to relax investment regulations for real estate investment trusts (REITs) and infrastructure investment trusts (InvITs). This comes in response to strong investor interest in recent infrastructure offerings, such as the ₹6,000 crore Raajmarg InvIT issue launched in March, which has amplified the call for increased insurer involvement in long-term yield assets.
Currently, insurers are limited to a maximum of 3% investments in both REITs and InvITs. The Insurance Regulatory and Development Authority (IRDAI) is considering a proposal that would raise the combined exposure limit to 6%, permitting insurers to allocate investments across both asset types based on available opportunities, according to insiders.
REITs, which aggregate investor capital into income-generating real estate, and InvITs — which manage assets like highways and renewable energy projects — are gaining traction as appealing long-duration yield products ideal for institutional investors with stable liability profiles.
“The National Highways Authority of India (NHAI) and industry stakeholders have advocated for enhanced flexibility in insurer engagement with InvITs, particularly after recent issuance success,” stated a source familiar with the discussions. “If approved, the new guidelines would provide a unified 6% cap across both REITs and InvITs, rather than separate limits.”
The dialogue is still in its initial phases, and it may take several months for implementation, according to sources. The call for regulatory easing gained momentum following the successful launch of the Raajmarg InvIT, which saw significant institutional backing. At the time of its introduction, the benchmark 10-year government bond yield was around 6.95%, while the InvIT offered yields near 12%, making it an attractive option for long-term investors in search of reliable cash flows.
Insurance companies reportedly subscribed to almost 20-25% of the ₹6,000 crore issuance, despite existing investment restrictions, as one of the sources noted. Several insurers that participated in recent listed REITs, such as Embassy Office Parks and Mindspace Business Parks, indicate that high-quality REIT and InvIT structures have the potential to deliver stable, long-term returns.
