SEBI Reclassifies REITs as Equity: Boosting Mutual Fund Participation and Index Inclusion
The Securities and Exchange Board of India (SEBI) has reclassified Real Estate Investment Trusts (REITs) as equity instruments, a move that is expected to enhance mutual fund participation and potential inclusion in equity indices. This decision aligns India with global best practices and strengthens the REIT ecosystem.
SebiReitsEquity InstrumentsMutual FundsIndex InclusionReal Estate NewsSep 14, 2025
A REIT is a company or trust that owns, operates, or finances income-producing real estate. The regulator stated that the move reflects the equity-like characteristics of REITs, which are relatively more liquid, and aligns India with global best practices.
Infrastructure Investment Trusts (InvITs), however, will continue to be classified as “hybrid” products due to their private placement structure, stable cash flows, and lower liquidity.
Industry stakeholders hailed the decision as a turning point for India’s REIT ecosystem. The Indian REITs Association (IRA) described SEBI’s move as “a significant milestone in strengthening the REIT ecosystem in India.” The IRA noted that, just like the regulator’s earlier reform in July 2021 when the lot size of REITs was reduced, this step would foster greater market participation, improve liquidity, and position India as a progressive destination for institutional capital.
The association also welcomed the expansion of the “Strategic Investor” category for REITs, which is expected to facilitate wider investor participation. “We now hope the stock exchanges make the necessary changes in the eligibility criteria of indices to enable REITs to be part of the eligible ones,” IRA added.
Echoing similar sentiments, Amit Shetty, CEO of Embassy REIT, said SEBI’s decision would act as a catalyst to broaden the investor base and bring REITs further into the mainstream. “We welcome and commend SEBI’s landmark move to classify REITs as equity instruments. 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,” he said.
Market experts believe the reclassification will not only deepen the REIT market but also provide an opportunity for domestic mutual funds to tap into this asset class more meaningfully, mirroring practices seen in mature global markets.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
Frequently Asked Questions
What is a Real Estate Investment Trust (REIT)?
A Real Estate Investment Trust (REIT) is a company or trust that owns, operates, or finances income-producing real estate. REITs allow individuals to invest in large-scale, income-producing real estate without having to buy, manage, or finance properties directly.
Why did SEBI reclassify REITs as equity instruments?
SEBI reclassified REITs as equity instruments to reflect their equity-like characteristics, such as higher liquidity. This move aligns India with global best practices and is expected to enhance mutual fund participation and potential index inclusion.
What are the benefits of this reclassification for the REIT market?
The reclassification is expected to deepen the REIT market, improve liquidity, and attract more institutional and retail investors. It also positions India as a progressive destination for institutional capital and aligns it with mature global markets.
What is the difference between REITs and InvITs?
REITs focus on income-producing real estate, such as office buildings and shopping centers, while InvITs focus on infrastructure projects like roads and power plants. REITs are now classified as equity instruments, while InvITs are classified as hybrid products due to their private placement structure and stable cash flows.
How will this decision impact mutual funds?
The reclassification of REITs as equity instruments will provide an opportunity for domestic mutual funds to tap into this asset class more meaningfully, similar to practices in mature global markets. This is expected to broaden the investor base and enhance liquidity.
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