NEW DELHI: Markets regulator Sebi will work with industry stakeholders to include REITs (real estate investment trusts) in market indices, a move that is expected to significantly increase liquidity for these instruments, chairman Tuhin Kanta Pandey said on Friday.Speaking at the National Conclave on REITs and InvITs-2025, Pandey noted, “Sebi will work with all stakeholders to facilitate inclusion of REITs in indices.”
REITs are companies that own and operate real estate. They offer investors the opportunity to own expensive real estate and earn dividend income to grow their capital over time.
He added that these instruments, once included, would obviously improve liquidity.The Sebi chief emphasized that the regulator is also evaluating additional measures to facilitate ease of doing business for REITs and InvITs (infrastructure investment trusts).
As part of these efforts, Sebi is exploring a proposal to widen the pool of liquid mutual funds in which REITs and InvITs can invest, while ensuring investor protection.
Pandey further said that the regulator is exploring whether private InvITs will be allowed to invest in greenfield projects, provided there are adequate safeguards.
At the same time, Sebi is actively working with institutional investors to deepen their participation in these instruments. To support this push, Sebi has collaborated with the Finance Ministry and various state governments to accelerate monetization of public assets, he said.
“We are working with the Insurance Regulatory and Development Authority of India (IRDAI), the Pension Fund Regulatory and Development Authority (PFRDA) and the Employees Provident Fund Organization (EPFO) to facilitate greater participation of their entities under their purview,” he added.
While the possibilities are vast, Pandey acknowledged that the market for these instruments is still in its infancy.
Sebi will continue to provide the necessary framework and guardrails, he said, but emphasized that sponsors, managers, advisors and industry intermediaries must believe in the potential of the asset class and help build depth and liquidity.
In the context of India’s progress, he noted that the global REIT markets are much more mature.
On private participation, Pandey noted that investor awareness remains low. Surveys show that awareness of these instruments is only about 10 percent, while penetration is less than 1 percent.
“This needs to change,” he said, emphasizing that retail investors should start viewing REITs and InvITs as natural additions to their portfolios, alongside stocks, mutual funds, bonds and bank deposits.
In recent months, Sebi has introduced several measures to make these products more retail-friendly, increase liquidity and strengthen regulations.
A major step in this direction came in September, when the Sebi board approved the classification of REITs as equities, while retaining the ‘hybrid’ classification for InvITs.
With this reclassification, mutual fund investments in REITs will now fall within their equity allocation limits, making REITs eligible for inclusion in equity indices. This is expected to pave the way for improved investment flows from mutual funds.
“The reclassification to equities will enable equity funds to allocate more meaningfully and facilitate index inclusion and passive flows,” Pandey said, adding that it would also create more scope for funds to invest in InvITs on the hybrid side.
Additionally, the regulator has lowered the entry barriers for InvITs, a move that is expected to increase the pool of potential participants and further improve liquidity.
Pandey noted that the establishment of a Maharashtra Infrastructure Investment Trust marks an important step in enabling infrastructure financing at the state level.
He also welcomed NHAI’s decision to set up its public InvIT, which will now be accessible to domestic and retail investors. According to him, this development heralds a new era of public participation in the construction of India’s highways.
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