REITs Reclassified as Equity: A Game-Changer for Real Estate Investment
MUMBAI: The reclassification of Real Estate Investment Trusts (REITs) as equity is a significant development that will make these trusts eligible for inclusion in benchmark indices. This change is expected to draw in mutual funds and institutional investors, providing a much-needed boost to the real estate sector.
Developers will benefit from lower financing costs and more diversified funding options. Meanwhile, investors can diversify their portfolios by investing in real estate with the potential for steady dividends and capital appreciation, all without the illiquidity associated with direct property ownership.
An REIT is an entity that owns income-generating real estate properties. Investors earn returns from the rents and dividends generated by these properties without the need to own the properties directly. This structure makes REITs an attractive investment option for a wide range of investors.
Venkat N Chalsani, the chief executive of the mutual fund industry body Amfi, commented on the reclassification. 'The reclassification of REITs as 'equity' for mutual fund investments is a timely step that will enhance diversification opportunities and support the growth of real estate as an investible asset class,' he said.
These initiatives are expected to broaden investor participation, strengthen the long-term health of the mutual fund industry, and strike a thoughtful balance between regulatory rigor, investor protection, and ease of doing business.
For REIT managers, the move is equally transformative. Amit Shetty, the chief executive of Embassy REIT, stated, 'At Embassy REIT, 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.'
According to a report by Anarock, the REIT market has grown steadily since the first listing in 2019. As of August 2025, the market has a capitalization of about $18 billion. With three more listings expected in the next four years, the market is projected to cross $25 billion by 2030. However, this represents only about 20% of institutional real estate, indicating significant room for growth.
The reclassification of REITs as equity is a strategic move that aligns with the broader goals of enhancing investor participation and liquidity in the real estate sector. It is expected to bring more institutional and retail investors into the market, contributing to the overall stability and growth of the real estate industry in India.
