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India’s move to allow greater pension-fund participation in REITs, InvITs and Category I and II AIFs is being seen as a major reform for long-term capital growth. Industry leaders say the change will bring stable, patient capital into real estate, infrastructure and high-growth sectors. Pension funds are expected to strengthen funding for income-generating assets, improve yield stability and support large-scale urban and infrastructure development. Experts note that the policy also helps diversify pension portfolios while raising governance standards and investor confidence. With long-horizon capital entering these investment vehicles, the reform is likely to deepen institutional participation, improve liquidity and support India’s goal of building a more resilient and mature capital market.
India’s decision to expand pension-fund participation across regulated investment vehicles—particularly REITs, InvITs and Category I & II AIFs—is emerging as one of the most significant reforms in recent years for long-term capital formation. Industry leaders believe the move will not only deepen institutional participation but also reshape how infrastructure, real estate and high-growth sectors raise stable, long-duration funds. Advertisement
According to Shirish Godbole, CEO of Knowledge Realty Trust, the participation of pension funds in REITs and InvITs reflects an important structural progression in India’s financial landscape. He noted that such involvement strengthens the capital base for both real estate and infrastructure, while simultaneously helping the country move towards more efficient and resilient capital markets. He emphasised that the infusion of patient, long-term capital enhances yield stability and supports sustained creation of high-quality, income-producing assets—an essential requirement as India accelerates urban development and infrastructure expansion.
This sentiment is echoed across the alternative investments industry, which views pension-fund access as a catalyst for broadening the base of institutional investors in India. Ankur Jalan, CEO of Golden Growth Fund (GGF), a Category II Alternative Investment Fund, observed that permitting pension funds to invest in Category I and II AIFs represents a strategic shift in the country’s long-term capital strategy. He stated that the policy enables deeper institutional participation in alternative assets, channelling stable and predictable capital flows into high-growth sectors that require patient investment.
Mr Jalan further highlighted that this reform enhances diversification for pension portfolios while supporting enterprise growth, innovation and sectoral development. By widening access to high-quality investment opportunities, the move helps create a balanced and sustainable investment ecosystem that aligns risk with long-term value creation. He added that pension-backed participation elevates governance standards, transparency and investor confidence across the AIF space.
Collectively, the policy shift is expected to accelerate India’s aspiration of building a more mature, broad-based capital market. With pension funds traditionally known for their conservative and long-horizon investment profile, their expanded role is likely to stabilise yield-based instruments, improve liquidity, and support large-scale infrastructure, housing and innovation-led projects.
Industry experts believe that as pension funds begin allocating more meaningfully across REITs, InvITs and AIFs, India will move closer to global benchmarks of institutional capital participation—thereby reinforcing economic resilience and enabling sustained long-term growth.
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