PFRDA Simplifies Investment Rules for REITs and InvITs

NEW DELHI: The Pension Fund Regulatory and Development Authority (PFRDA) has introduced clearer pathways for National Pension System (NPS) funds to invest in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). These changes are outlined in the revised master circular on investment guidelines issued on December 10, 2025.

PFRDA has set new exposure thresholds to regulate such investments. Cumulative investments across REIT and InvIT debt instruments and units cannot exceed 3% of a pension fund’s total assets under management. Additionally, pension funds may not hold more than 15% of the outstanding debt instruments issued by a single REIT or InvIT, and their purchase of units in any single issuance is capped at 5%.

These revised norms replace earlier restrictive conditions, particularly easing participation challenges that had limited entry from both government and private pension pools. Industry leaders have hailed the move as a critical step towards expanding long-tenor domestic institutional participation in income-generating real estate.

Ramesh Nair, CEO & MD of Mindspace REIT, noted that the updated guidelines address “two long-awaited reforms.” The removal of the sponsor rating requirement now creates a viable entry route for government pension funds to participate in REITs. For private pension funds, treating REITs as part of the equity category broadens the investible universe and allows greater flexibility to increase allocations. “Together, these changes strengthen the investment framework for retirement-linked capital and promote more consistent participation from both public and private pension pools,” Nair added.

Shirish Godbole, CEO of Knowledge Realty Trust, emphasized that pension-fund participation strengthens the capital base for infrastructure and real estate while helping deepen India’s capital markets. “Their patient capital enhances yield stability and enables sustained, high-quality asset creation,” he said.

Amit Shetty, CEO of Embassy REIT, highlighted that the revised norms mark “an important step in strengthening India’s retirement savings framework.” The move widens investment choices for NPS subscribers by enabling exposure to high-quality debt, equity, infrastructure, and real estate-linked instruments. “The changes will help channel long-term pension capital into productive Grade-A assets and improve retirement outcomes for millions of Indians, calling it a strong endorsement of transparent, regulated yield products in India’s deepening REIT market,” Shetty added.

The updated guidelines take immediate effect and are expected to accelerate domestic institutional participation in the country’s listed REIT and InvIT platforms, which have so far relied predominantly on foreign capital.