The Securities and Exchange Board of India (Sebi) has introduced reforms aimed at boosting mutual fund participation in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), a move that could deepen India’s alternative asset market. Under the amendments to the Sebi (Mutual Funds) Regulations, 1996, REITs will now be classified as “equity” instruments, while InvITs will continue as “hybrid” products. Sebi explained that REITs, being relatively liquid and aligned with global practices of inclusion in equity indices, are better suited to an equity classification. InvITs, which are largely privately placed and built around stable cash flows, will retain their hybrid status.
With REITs now counted within mutual fund allocations to equity instruments, they become eligible for inclusion in equity indices, potentially increasing mutual fund investment in the segment. This reclassification also frees up the existing joint investment limit for REITs and InvITs, which will now apply solely to InvITs, allowing further growth in that category.
The reforms were shaped after public consultation in April 2025 and detailed discussions with industry bodies, including the Mutual Fund Advisory Committee. The Indian REITs Association (IRA) welcomed the move, calling it a “progressive step” that aligns India with global best practices and strengthens the REIT ecosystem. The IRA highlighted that the changes would accelerate growth by widening investor participation and improving liquidity, similar to the effects seen after Sebi reduced REIT lot sizes in 2021.
The regulator also expanded the scope of “strategic investors” in REITs, further broadening the investor base. With these reforms, Sebi aims to position India as an attractive destination for institutional capital in yielding assets, while stock exchanges are expected to update index eligibility criteria to include REITs. Overall, these measures are anticipated to strengthen both the REIT and InvIT ecosystem, facilitating greater participation from mutual funds, pension funds, and other institutional investors in India’s growing market for real estate and infrastructure-backed investment products.
