NEW DELHI: The Securities and Exchange Board of India (Sebi) plans to collaborate with industry stakeholders to include Real Estate Investment Trusts (REITs) in market indices, a step that is anticipated to significantly enhance liquidity for these instruments, as stated by chairman Tuhin Kanta Pandey on Friday.
Speaking at the National Conclave on REITs and InvITs-2025, Pandey remarked, “Sebi will work with all stakeholders to facilitate the inclusion of REITs in indices.”
REITs manage and operate real estate, providing investors an opportunity to invest in high-value properties while earning dividend income that can increase capital over time.
Once included in the indices, these instruments are expected to see a natural boost in liquidity.
Pandey also mentioned that Sebi is reviewing additional measures to simplify business operations for REITs and Infrastructure Investment Trusts (InvITs).
As part of these initiatives, Sebi is considering a proposal to expand the variety of liquid mutual fund schemes eligible for REITs and InvITs investments while prioritizing investor protection.
Furthermore, he indicated that the regulator is exploring the possibility of allowing private InvITs to invest in greenfield projects, provided that adequate safeguards are established.
Sebi is actively working with institutional investors to increase their engagement in these instruments and is collaborating with the Ministry of Finance and various state governments to expedite public asset monetization.
“We are coordinating with the Insurance Regulatory and Development Authority of India (IRDAI), Pension Fund Regulatory and Development Authority (PFRDA), and Employees Provident Fund Organisation (EPFO) to encourage greater participation from their entities,” he added.
While opportunities in this sector are substantial, Pandey noted that the market for these instruments is still in its early stages.
Sebi will continue to establish the necessary framework while emphasizing that industry sponsors, managers, advisors, and intermediaries must recognize the asset class’s potential to foster depth and liquidity.
He highlighted that global REIT markets are considerably more developed compared to India’s.
On the topic of retail participation, Pandey acknowledged that investor awareness is currently low, with surveys indicating about 10% awareness and under 1% market penetration.
“This must change,” he urged, advocating for retail investors to start viewing REITs and InvITs as natural extensions of their portfolios, alongside equities, mutual funds, bonds, and bank deposits.
In recent months, Sebi has implemented several measures aimed at making these products more accessible to retail investors, improving liquidity, and strengthening regulations.
A key milestone was reached in September when the Sebi board approved the classification of REITs as equity while maintaining InvITs’ ‘hybrid’ classification. This allows mutual fund investments in REITs to count towards equity allocations, making them eligible for equity indices and increasing investment flows from mutual fund schemes.
“Reclassifying REITs as equity will enable equity mutual funds to invest more substantially and facilitate inclusion in indices and passive investments,” Pandey stated, also mentioning that it will provide more space for funds to invest in InvITs on the hybrid front.
Additionally, Sebi has lowered the entry thresholds for InvITs to attract a broader range of participants and further enhance liquidity.
Pandey pointed out that the establishment of a Maharashtra infrastructure investment trust is a significant step toward facilitating state-level infrastructure financing.
He also praised NHAI’s initiative to launch its public InvIT, which will now be available to domestic and retail investors, marking a new era of public engagement in the construction of India’s highways.
