India’s real estate investment trust (REIT) framework is set for its next round of reforms, with the Securities and Exchange Board of India (Sebi) examining inclusion in indices and whether a defined portion of under-construction and greenfield real estate assets can be permitted within REIT portfolios.
Speaking at the National Conclave on REITs & InvITs — Harnessing Capital. Accelerating Growth. Reimagining Bharat on November 21, Sebi Chairman Tuhin Kanta Pandey said the regulator is working on guardrails that would allow only a capped share of value from early-stage projects to ensure investors continue to receive steady returns.
“We are looking at allowing a certain percentage of under-construction or greenfield assets, but with safeguards so that investor returns remain protected,” he said.
Index inclusion
A parallel proposal is being shaped to enable REITs to be considered for inclusion in major indices, Pandey said, adding that such inclusion would require conditions related to size and investor participation. “We are working towards a proposal to include REITs in indices. Their assets under management must be comparable to other index constituents, and public shareholding would need to meet the prescribed criteria,” he said.
Sebi is examining whether REITs can eventually be considered for indices using a glide-path approach.
MF classification
Pandey noted that Sebi has already completed the classification of REITs as equity instruments for mutual funds, while Infrastructure Investment Trusts (InvITs) will continue to be treated as hybrid instruments. “This brings clarity for mutual funds on how to allocate investments. The equity classification for REITs will support better liquidity,” he said.
Demand for capital
As Sebi finalises the next set of reforms, the focus remains on strengthening India’s alternative asset ecosystem, improving liquidity, and preparing the REIT–InvIT market to support the country’s long-term infrastructure financing needs.
With India’s infrastructure ambitions expanding rapidly, Pandey said instruments like REITs and InvITs will be essential to meeting long-term financing needs. “Over the next two decades, India requires massive investments in power demand and urban transport. Nabfid estimates that India will need around Rs 700 trillion in core sectors by 2047. The next phase of our infrastructure story must be driven by instruments like REITs and InvITs,” he said.
Despite this potential, investor penetration in REITs and InvITs remains low at around one percent, he noted. India is currently the fourth-largest REIT market in Asia, with 24 listed InvITs and a combined REIT-InvIT asset base of approximately Rs 9.25 lakh crore as of October.
NHAI's public InvITs
On the supply side, he noted that state-owned entities could support market expansion through public InvITs. “Companies like NHAI are not listed, so they can easily bring public InvITs,” he said. Sebi is also working with the Finance Ministry to accelerate public asset monetisation.
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