REITs Gain Equity Status: Unlocking New Investment Opportunities in India
The Securities and Exchange Board of India (SEBI) has reclassified Real Estate Investment Trusts (REITs) as equity instruments, paving the way for increased institutional and retail participation in the real estate market.
ReitsReal EstateSebiEquity InstrumentsMutual FundsReal EstateSep 14, 2025
The decision to reclassify REITs as equity instruments has been widely welcomed by industry experts and stakeholders. By delinking REITs from Infrastructure Investment Trusts (InvITs), which remain classified as hybrid instruments, SEBI has taken a significant step towards integrating India's REIT market with global best practices.
Asheesh Mohta, Head of Real Estate India at Blackstone, highlighted the potential impact of this change: “This brings India in line with global best practices where REITs are an integral part of equity indices. In markets like the US, REITs represent over $1.5 trillion in market capitalization and form a core component of the S&P 500. India currently accounts for less than 1% of global REIT market capitalization, but with this progressive step, the opportunity for index inclusion, deeper institutional participation, and enhanced capital flows is immense.”
REITs were introduced in India in 2019 and have since demonstrated their potential as stable income-yielding instruments. With Grade A office stock in India crossing 700 million square feet, REITs are becoming increasingly central to the country’s urbanization and corporate growth story.
Globally, REITs have proven to be a stable asset class, delivering annualized returns of 8-12% with lower volatility compared to direct real estate exposure. Sandeep Parekh, Managing Partner at FinSec Law Advisors, emphasized the importance of this regulatory change: “By aligning REITs with equity, SEBI has removed a long-standing classification anomaly in India. This will not only enhance retail participation through mutual funds and ETFs but also allow pension and sovereign wealth funds to increase exposure.”
The timing of SEBI’s move is critical, coming at a time when India’s real estate sector is attracting significant global attention and experiencing steady occupier demand. Amit Shetty, CEO of Embassy REIT, sees this as a catalyst: “We see this as a catalyst to broaden investor participation, enhance liquidity, enable future index inclusion, and further strengthen REITs as a mainstream investment asset class.”
Shirish Godbole, CEO of Knowledge Realty Trust, India’s most recent REIT, echoed this sentiment: “This long-awaited move brings regulatory clarity, simplifies fund flows, and aligns India with global practices, making Real Estate far more attractive to both domestic and international investors. Greater participation through equity indices and mutual funds will not only improve liquidity but also reduce the cost of capital for developers.”
Gautam Mehra, Partner at PWC, noted that globally, REITs are well-established, with over 40 countries adopting the structure and institutional allocations forming a mainstream part of diversified portfolios. India’s REIT market, currently valued at under $20 billion, has made significant strides since the introduction of the enabling REIT Regulations in 2014.
REITs already own and manage over 160 million square feet of Grade A office space, representing roughly 20% of India’s premium commercial stock, with occupancy levels consistently above 85-90%. This reclassification will pave the way for index inclusion, broaden institutional participation, and align India with global practices. It should deepen market liquidity, attract larger pools of capital into real estate, and diversify the investor base further.
With five listed REITs already trading on Indian exchanges and more in the pipeline, the SEBI decision firmly positions India to scale its market, integrate with global benchmarks, and attract long-term capital at a time when the real estate sector is on a strong growth trajectory. For investors, the equity classification opens up new access points, from index-linked funds to broader mutual fund participation. For asset managers and developers, it means greater liquidity, smoother fundraising cycles, and enhanced visibility among global investors.
Frequently Asked Questions
What is the significance of SEBI reclassifying REITs as equity instruments?
Reclassifying REITs as equity instruments aligns them with listed stocks in mutual fund portfolios, addressing a long-standing classification issue. This move enhances liquidity, attracts institutional and retail participation, and paves the way for index inclusion.
How does the reclassification impact the real estate market in India?
The reclassification makes REITs more attractive to both domestic and international investors, improving liquidity and reducing the cost of capital for developers. It also aligns India with global best practices in real estate investment.
What are the potential benefits for investors in REITs?
Investors can now access REITs through index-linked funds and broader mutual fund participation. This provides new investment opportunities with stable returns and lower volatility compared to direct real estate exposure.
How does this change affect asset managers and developers?
For asset managers and developers, the equity classification means greater liquidity, smoother fundraising cycles, and enhanced visibility among global investors. This can lead to more efficient capital mobilization and growth in the real estate sector.
What is the current status of India's REIT market?
India’s REIT market, currently valued at under $20 billion, has made significant strides since the introduction of the enabling REIT Regulations in 2014. REITs already manage over 160 million square feet of Grade A office space, representing roughly 20% of India’s premium commercial stock.
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