The Securities and Exchange Board of India (SEBI) has approved the classification of Real Estate Investment Trusts (REITs) as ‘equity’ for investment purposes by mutual funds and specialized investment funds, while retaining the ‘hybrid’ classification for Infrastructure Investment Trusts (InvITs). The move aims to broaden the investor base and align Indian practices with global standards.
SEBI’s board approved amendments to the SEBI (Mutual Funds) Regulations, 1996, allowing REITs to be included under the equity category for strategic investors in public issues. InvITs will continue to be treated as hybrid instruments due to their lower liquidity and stable cash flows, in contrast to REITs which are relatively more liquid and equity-like in nature. SEBI highlighted that the reclassification is intended to enhance ease of doing business and attract wider institutional participation.
REITs are investment vehicles that own and manage income-generating real estate, providing regular returns to investors. Small and large investors can acquire units of REITs in primary or secondary markets, similar to shares or mutual fund units. Previously, both REITs and InvITs were classified as hybrid funds, reflecting their combination of debt-like stability and equity-like potential for capital appreciation.
Indian REITs Association Opinion
Indian REITs Association (IRA) welcomes SEBI’s progressive move to classify Real Estate Investment Trusts (REITs) as equity for the purpose of inclusion in market indices. This important step marks a significant milestone in strengthening the REIT ecosystem in India and aligns with global best practices where REITs are part of equity indices. This decision is a step forward that will contribute to enhancing the depth of REIT market and accelerating the growth of these instruments in India. By enabling this, SEBI has paved way for widening investor participation in these instruments and also improving liquidity.
Similar to the reduction in lot size, which SEBI enabled in July 2021, this reform shall also help foster greater market participation and position India as a progressive investment destination for institutional investment in yielding assets.
IRA also welcomes SEBI’s move to expanding the scope of “Strategic Investor” for Real Estate Investment Trusts (REITs) to facilitate wider investor participation.
The IRA commends SEBI for these forward-looking reforms and remains committed to working with all stakeholders to build a robust and vibrant REIT market in India. We now hope the stock exchanges make the necessary changes in the eligibility criteria of indices to enable REITs to be part of the eligible ones.
Amit Shetty, CEO of Embassy REIT, described the move as a catalyst for broader participation, improved liquidity, and future index inclusion. He added that the step would further reinforce REITs as a mainstream investment asset class in India.
The decision follows steady growth in India’s REIT market since its first listing in 2019, with total market capitalization reaching approximately $18 billion as of August 2025. Analysts expect this to rise above $25 billion by 2030, with the launch of three new REITs over the next few years.
Experts note that reforms such as reduced lot sizes and equity reclassification are expected to encourage greater market participation and strengthen India’s position as a progressive investment destination for institutional investors in real estate assets.
SEBI’s approval represents a significant policy shift, emphasizing transparency, liquidity, and investor protection. By enabling REITs to be treated as equity instruments, the regulator aims to make real estate investment more accessible, structured, and attractive to a broader set of domestic and international investors.
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