NEW DELHI: In a move aimed at deepening participation in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), securities and exchange board of India (SEBI) has approved amendments to the SEBI (Mutual Funds) Regulations, 1996, reclassifying REITs as “equity” while retaining InvITs under the “hybrid” category for mutual fund and specialized investment fund investments.
The decision, taken at SEBI’s board meeting, is expected to pave the way for greater mutual fund allocation into REITs by allowing them inclusion in equity indices. The regulator said the changes were proposed after public consultation in April 2025 and detailed deliberations with industry stakeholders, adding that the move aligns domestic regulations with global practices where REITs are treated as equity instruments.
“Post reclassification, investment by mutual funds shall be considered within the equity exposure limit. This also makes REITs eligible for inclusion in equity indices. Further, with the existing investment limits now exclusively available for InvITs, growth is expected in that segment as well,” SEBI stated.
While REITs were seen as more aligned with equity given their relatively higher liquidity, InvITs—primarily placed privately with stable cash flows and lesser liquidity—will continue under the hybrid classification.
In another key decision, SEBI expanded the definition of “strategic investor” in InvITs and REITs to allow wider investor participation. Post-amendment, Strategic Investor eligibility has been broadened to include: (i) all qualified institutional buyers—such as 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 net worth above ₹500 crore; and (iii) Reserve Bank of India-registered non-banking finance companies in the middle, upper and top layers.
According to SEBI, the proposal followed an August 2025 consultation paper and recommendations of the hybrid securities advisory committee. The move is expected to ease capital raising and instil greater confidence in public issues of InvITs and REITs.
Welcoming the reforms, the Indian REITs association (IRA) said the equity reclassification marks a “significant milestone” for India’s REIT ecosystem.
“This important step aligns REITs in India with global best practices and will enhance their market depth and liquidity,” IRA said in a statement. “Similar to SEBI’s decision in July 2021 to reduce trading lot sizes, this reform will foster greater participation and position India as a progressive investment destination in yielding assets.”
Amit Shetty, CEO, Embassy REIT said, “We see this as a catalyst to broaden investor participation, enhance liquidity, enable future index inclusion, and further strengthen REITs as a mainstream investment asset class.”
The industry body also commended SEBI’s decision to widen the strategic investor framework, noting it would expand participation further. “We now hope stock exchanges make necessary changes in their eligibility criteria to enable REITs to be part of equity indices,” IRA added.
Alok Aggarwal, MD & CEO, Brookfield India Real Estate Trust said, “We expect this move to facilitate inclusion of Indian REITs in benchmark indices, which should bring in more investors and deepen the attractiveness of this product to broader capital markets.”
“This reform will enhance liquidity, broaden investor participation, and strengthen the depth of the REIT market in the country. The move, along with the expansion of the definition of Strategic Investors, will accelerate the next phase of growth for REITs and reinforce India’s positioning as an attractive destination for institutional capital in yield-generating assets,” said Ramesh Nair, MD and CEO, Mindspace REIT.
