SEBI move to classify REITs as equity widens investor reach

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Photo:Reuters

India’s financial markets are set for a major shift after the market regulator decided to treat Real Estate Investment Trusts (REITs) as “equity” for investments by mutual funds. This important change is expected to attract more investors, improve liquidity, and boost growth in the country’s real estate sector.

What are REITs?

REITs are investment vehicles that own or operate large real estate projects such as office complexes, malls, or commercial parks. Instead of buying property directly, investors can buy REIT units and earn income from rents or leases. This allows both small and large investors to benefit from high-value real estate without actually owning the buildings.

According to the new rules, mutual funds will now consider REITs as “equity” investments, while Infrastructure Investment Trusts (InvITs) will continue to remain under the “hybrid” category. This reclassification is seen as a progressive step that aligns India’s financial system with global best practices, where REITs are already included in major stock indices.

Why is this important?

Until now, REITs were not seen on the same level as equity investments, which made fund managers more cautious about putting money in them. With the new classification, mutual funds can now freely invest in REITs, unlocking new pools of capital for India’s real estate market.

Industry experts say this will also increase investor trust, encourage the listing of more REITs, and make India more attractive to international investors.

Industry Welcomes the Move

Top REIT companies and industry leaders have praised this reform:

* Knowledge Realty Trust’s CEO Shirish Godbole called the move a “long-awaited reform” that will simplify fund flows, bring regulatory clarity, and attract both domestic and foreign investors.

* Mindspace REIT’s CEO Ramesh Nair said the decision will improve liquidity, broaden investor participation, and push India closer to becoming a hub for institutional capital.

* Brookfield India Real Estate Trust’s MD & CEO Alok Aggarwal believes this will support index inclusion of Indian REITs, meaning they could soon become part of benchmark indices, drawing more global investors.

* Embassy REIT’s CEO Amit Shetty said the move will act as a catalyst to make REITs a mainstream investment class in India.

The Indian REITs Association (IRA) also welcomed the step, calling it a “milestone in strengthening the REIT ecosystem.”

Current Scenario of REITs in India

* India introduced its first REIT in 2019.

* Today, there are five listed REITs:

1. Brookfield India Real Estate Trust

2. Embassy Office Parks REIT

3. Mindspace Business Parks REIT

4. Nexus Select Trust

5. Knowledge Realty Trust

* The sector currently manages assets worth over $2 billion and is expected to double to $4 billion by 2030.

* Together, four of these REITs have distributed more than ₹24,300 crore to investors as returns.

Returns from REITs

According to a recent industry report, Indian REITs are generating yields of 6% to 7.5%, which is better than many developed markets, including the United States. This makes them an attractive option for both Indian and global investors looking for steady income.

The Bigger Picture

This reform is not just about real estate — it is about deepening India’s capital markets. By reclassifying REITs as equity, SEBI has created a smoother path for:

* Higher investor participation

* Greater liquidity in the market

* Future index inclusion of REITs

* Stronger positioning of India as an investment hub for yield-generating assets

For ordinary investors, this means easier access to premium real estate projects like office towers, shopping malls, and IT parks, which were earlier reserved for large corporations or wealthy individuals.

Looking Ahead

With this decision, the Indian real estate sector could see a new wave of growth. More REIT listings are expected in the coming years, giving investors broader choices and stable returns. Experts believe that this is just the beginning of India’s journey to make REITs a mainstream investment tool, much like in the U.S. or Singapore.