Sebi signals major policy shift with index inclusion, liquidity push for REITs, InvITs

The Securities and Exchange Board of India (SEBI) is preparing a significant overhaul of the country’s REIT and InvIT landscape, with Chairman Tuhin Kanta Pandey indicating that index inclusion for Real Estate Investment Trusts will be pursued in a phased and carefully calibrated manner. The move marks one of the strongest regulatory commitments yet to expand India’s relatively young market for asset-backed investment vehicles.

Speaking at the National Conclave on REITs and InvITs 2025 in New Delhi on Friday, Pandey laid out a multi-pronged strategy aimed at improving liquidity, widening participation and enhancing governance standards across the sector. He highlighted that India already ranks as the fourth-largest REIT market in Asia, but remains shallow when compared with global benchmarks. Retail participation stands at just 1 percent, and trading volumes continue to lag, he noted.

A major pillar of SEBI’s plan is to redefine how mutual funds classify and invest in these instruments. Pandey announced that REITs will now be treated as equity for the purpose of mutual fund categorisation, while InvITs will continue to be grouped under hybrid instruments. The distinction, he said, provides “clarity and elbow room” to fund managers, enabling them to allocate larger pools of capital with greater confidence. SEBI is also evaluating an expansion of the list of liquid mutual funds permitted to invest in REITs and InvITs—an intervention aimed at strengthening market depth and encouraging more active participation from domestic asset managers.

Pandey reiterated that governance, transparency and investor protection will remain the cornerstones of regulatory oversight as the market expands. Citing recent survey results, he pointed out that more Indians tend to invest when disclosures and communication are offered in languages they understand. He urged market participants to deepen their outreach efforts, especially among first-time investors entering the capital markets.

The chairman also underlined the strategic relevance of REITs and InvITs for India’s long-term infrastructure pipeline. With the National Bank for Financing Infrastructure and Development (NaBFiD) projecting a requirement of nearly Rs 700 lakh crore in infrastructure investment by 2047—driven by surging power demand, urban mobility projects and core transport systems—Pandey said capital markets must shoulder a much larger share of funding. REITs and InvITs, backed by predictable cash flows, are ideally positioned to support this transition, he noted.

As of October, India’s listed REITs and InvITs collectively managed around Rs 9.25 lakh crore in assets across 24 listed InvITs and several REITs. Pandey said SEBI is studying ways to further lower investment thresholds and attract more categories of institutional investors, including large non-banking finance companies, to serve as anchor participants. Efforts are also underway to fast-track public asset monetisation in coordination with the finance ministry and state governments. Entities such as NHAI, which are yet to be listed, can bring InvIT structures to the market more seamlessly, he said.

For investors, REITs and InvITs offer access to income-generating real estate or infrastructure assets—such as office parks, highways, transmission assets and renewable projects—through market-listed vehicles. Their yield-backed structures provide stable returns, while asset owners gain a transparent route to monetisation.