NEW DELHI: To enhance participation in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), the Securities and Exchange Board of India (SEBI) has approved amendments to the SEBI (Mutual Funds) Regulations, 1996, reclassifying REITs as “equity” while maintaining InvITs under the “hybrid” category for mutual fund and specialized investment fund investments.
The decision, made during SEBI’s board meeting, is expected to facilitate greater mutual fund investment in REITs by including them in equity indices. The regulator noted that these changes followed public consultations in April 2025 and extensive discussions with industry stakeholders. This adjustment aligns domestic regulations with global norms, which categorize REITs as equity instruments.
Post-reclassification, investments by mutual funds will count towards the equity exposure limit, making REITs eligible for equity indices inclusion. Additionally, with established investment limits for InvITs, there is anticipated growth in that sector as well,” SEBI stated.
REITs, noted for higher liquidity, will now align more closely with equity, while InvITs, often privately placed and offering stable cash flows but lower liquidity, will remain categorized as hybrid.
In a significant move, SEBI has expanded the definition of “strategic investor” for InvITs and REITs, broadening eligibility to include: (i) all qualified institutional buyers—like public financial institutions, provident funds, and PFRDA-registered pension funds with a minimum corpus of ₹25 crore; alternative investment funds; and state industrial development corporations; (ii) family trusts and SEBI-registered intermediaries with a net worth exceeding ₹500 crore; and (iii) Reserve Bank of India-registered non-banking finance companies in various tiers.
According to SEBI, these proposals came after an August 2025 consultation paper and recommendations from the hybrid securities advisory committee. This initiative is expected to facilitate capital raising and boost confidence in public offerings of InvITs and REITs.
The Indian REITs Association (IRA) welcomed these reforms, stating that the equity reclassification represents a “major milestone” for India’s REIT landscape.
“This crucial step aligns Indian REITs with global best practices, enhancing market depth and liquidity,” the IRA declared. “Similar to SEBI’s July 2021 move to reduce trading lot sizes, this reform will encourage wider participation and position India as an attractive destination for investment in yielding assets.”
Amit Shetty, CEO of Embassy REIT, remarked, “We view this as a catalyst for expanding investor involvement, increasing liquidity, enabling future index inclusion, and solidifying REITs as a key investment asset class.”
The industry body also praised SEBI’s initiative to broaden the strategic investor framework, emphasizing its potential to enhance participation. “We hope stock exchanges will adjust their eligibility criteria so that REITs can be included in equity indices,” the IRA added.
