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SEBI plans to work with industry players to enable the inclusion of REITs in market indices, a move expected to significantly boost liquidity. Chairman Tuhin Kanta Pandey said at the National Conclave on REITs and InvITs-2025 that the regulator is also examining ways to simplify operations for REITs and InvITs, including widening the liquid mutual fund schemes they can invest in and allowing privately placed InvITs to invest in greenfield projects with safeguards. Recent reforms include treating REITs as equity for mutual fund allocations and lowering entry thresholds for InvITs. SEBI is also engaging with IRDAI, PFRDA, EPFO and institutional investors to expand participation as retail awareness remains low.
Markets regulator SEBI stated earlier this week that it would begin engaging with industry participants to enable the inclusion of real estate investment trusts (REITs) in market indices-a development expected to substantially enhance liquidity for these instruments. Its chairman, Tuhin Kanta Pandey, mentioned at the National Conclave on REITs and InvITs-2025 that SEBI intended to collaborate with all concerned stakeholders to support index inclusion for REITs. Advertisement
REITs, which own and operate income-generating real estate, provide investors with an avenue to gain exposure to premium property assets and earn dividend income, thereby strengthening long-term capital growth. According to Pandey, index inclusion would naturally result in improved liquidity levels for these vehicles.
He further highlighted that SEBI was actively considering additional measures to simplify operations for both REITs and infrastructure investment trusts (InvITs). One such proposal under examination involves expanding the scope of liquid mutual fund schemes in which REITs and InvITs may invest, while maintaining stringent investor-protection norms.
Pandey also said that SEBI was exploring whether privately placed InvITs could be permitted to invest in greenfield projects, subject to robust safeguards. In parallel, the regulator has been in dialogue with institutional investors to encourage deeper engagement with these asset classes. As part of this push, SEBI has been coordinating with the Ministry of Finance and various state governments to speed up public asset monetisation.
He added that SEBI had been working with the Insurance Regulatory and Development Authority of India (IRDAI), the Pension Fund Regulatory and Development Authority (PFRDA) and the Employees' Provident Fund Organisation (EPFO) to facilitate broader participation from entities governed by these institutions.
Even as opportunities for expansion remain significant, Pandey acknowledged that India's market for these instruments is still at a relatively early stage. He said the regulator would continue providing a clear regulatory framework but emphasised that sponsors, managers, advisors and intermediaries needed to demonstrate belief in the asset class and contribute to establishing greater depth and liquidity.
Placing India's progress in a global context, he noted that mature REIT markets abroad have considerably higher penetration. Turning to retail investment, he pointed out that investor awareness remains notably low. Surveys indicate that only about 10 per cent of retail investors are aware of these instruments, with actual participation levels below 1 per cent. He stressed that this situation must change and suggested that retail investors should begin viewing REITs and InvITs as natural components of their portfolios, alongside equities, mutual funds, bonds and deposits.
Over the past few months, SEBI has rolled out several initiatives aimed at strengthening liquidity, improving regulatory clarity and making these products more accessible for retail participants. A key development took place earlier in the past quarter, when the SEBI board approved a change in classification to treat REITs as equity, while continuing to classify InvITs as hybrid instruments.
This reclassification means that mutual fund investments in REITs now fall within equity allocation limits, making REITs eligible for inclusion in equity indices and enabling mutual funds to allocate more meaningfully. Pandey said this would support passive investment flows and create additional space for fund houses to increase investments in InvITs on the hybrid side.
Additionally, the regulator has reduced entry thresholds for InvITs, a step expected to expand the investor base and enhance liquidity further. Pandey noted that the establishment of a Maharashtra-level infrastructure investment trust marks a significant milestone in enabling states to mobilise infrastructure funding independently.
He also welcomed the National Highways Authority of India's (NHAI) decision to create a public InvIT, which will now be open to domestic and retail investors. He indicated that this marks the beginning of a new phase in public involvement in the financing of India's highway network.
Source - PTI
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