EPFO, insurers could become the next big growth engine for REITs and InvITs: Report

India’s REIT and InvIT market could see a significant increase in institutional participation as pension funds and insurers gradually raise their allocations to listed real assets. A new report estimates that even modest increases in permitted exposure could channel hundreds of billions of rupees into the sector.

According to the Avendus report, Trust the Structure: REITs, InvITs and the Real Return, domestic long-duration institutional investors currently utilise only about 7.5% of their available regulatory limits for REITs and InvITs. Full utilisation of these limits could potentially redirect around ₹7 lakh crore into the asset class, equivalent to about 2.6 times the current free-float market capitalisation of all Indian REITs and InvITs.

EPFO has significant untapped potential

The Employees’ Provident Fund Organisation (EPFO), which manages an investible corpus of around ₹31.2 lakh crore, currently has limited exposure to REITs and InvITs and is largely restricted to PSU-sponsored trusts and prescribed rating safeguards.

The report argues that EPFO could potentially be allowed to invest in non-PSU REITs and InvITs, given the regulated structure of the vehicles and EPFO’s experience with listed equity exposure. A 2% additional allocation could channel more than ₹60,000 crore into the sector.

This opportunity is also supported by the expected expansion of India’s pension asset pool. The report estimates that the overall Indian pension asset pool could rise from around ₹47.7 lakh crore in 2025 to ₹77.8 lakh crore by 2030. EPFO’s assets are projected to increase from about ₹28.3 lakh crore to ₹40.8 lakh crore over the same period.

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Insurers offer another large capital pool

Insurance companies are another key source of potential institutional demand. The report notes that IRDAI currently caps combined REIT and InvIT exposure at 6% of investments, while global insurers typically allocate more than 8% to REITs, InvITs and infrastructure assets.

A 1 percentage-point increase in insurance exposure could potentially channel more than ₹60,000 crore into the asset class, according to the report.

The report sees insurers and pension funds as particularly well suited to REITs and InvITs because of their long-duration investment requirements. Pension funds, in particular, represent a natural investor base because of the relatively low volatility and stable, annuity-like cash-flow profile of the asset class.

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Under-allocation leaves room for institutional flows

The opportunity extends beyond EPFO and insurers. The report estimates that pension funds could contribute around ₹2.2 lakh crore of incremental demand by 2030, while the total additional investment pool across mutual funds, insurers, pension funds, foreign investors, retail and HNI investors and corporate treasuries could reach ₹11.6 lakh crore.

The report identifies greater EPFO access to non-PSU trusts and higher insurance allocations among five catalysts that could accelerate the next phase of REIT and InvIT growth. Other potential catalysts include REIT/InvIT ETFs, global index inclusion and new-sector listings.

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Long-duration capital could deepen the market

The report says the potential institutional shift is not simply about increasing ownership. Greater participation by pension funds and insurers could provide a deeper pool of patient, long-duration capital as India’s listed real-asset market expands.

It estimates that REITs and InvITs, which have grown to nearly ₹10 lakh crore of AUM in nine years, could surpass ₹20 lakh crore by 2030. The report also sees an annual primary-market opportunity of more than ₹1 lakh crore, indicating the potential scale of capital formation ahead.

With institutional investors currently using only a fraction of their permitted allocation capacity, even incremental changes in investment limits could therefore materially improve liquidity, broaden ownership and strengthen the role of REITs and InvITs in India’s long-term capital markets.