SEBI reclassifies REITs as equity; InvITs remain ‘hybrid
September 12, 2025
The shift will allow REITs to be included in market indices and attract mutual fund investments, aligning India with global best practices.
Acceding to a long-standing demand of real estate investment trusts (REITs), the Securities and Exchange Board of India has approved their classification as equity. However, it has retained the ‘hybrid’ classification for infrastructure investment trusts (InvITs).Classifying REITs as equity will facilitate mutual fund investments in them, while they can also be included in market indices.
REITs Association hails milestone reform
“This important step marks a significant milestone in strengthening the REIT ecosystem in India and aligns with global best practices where REITs are part of equity indices,” said the Indian REITs Association in a statement.
“This decision is a step forward that will contribute to enhancing the depth of REIT market and accelerating the growth of these instruments in India. By enabling this, SEBI has paved way for widening investor participation in these instruments and improving liquidity,” it said.
Blackstone-backed Knowledge Realty Trust’s CEO Shirish Godbole said, “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.” He added that greater participation through equity indices and mutual funds would not only improve liquidity but also reduce the cost of capital for developers.
InvITs retain hybrid tag for stability, liquidity
SEBI said that the reclassification takes into account the features of REIT units as being more inclined toward equity. Regarding the retention of InvITs as hybrid, it stated, “InvITs, on the other hand being products primarily privately placed with more stable cash flows and having lesser liquidity, the hybrid classification was proposed to be retained.”
It also pointed out that as a result of equity classification of REITs, the existing investment limit applicable for both REITs and InvITs would now be exclusively available for InvITs and benefit them.
Strategic investor scope expanded by SEBI
In another major move, SEBI has expanded the scope of strategic investors in REITs and InvITs, which will widen the investor base in such securities.Strategic investors will include all qualified institutional buyers, including retirement funds, AIFs, and state industrial development corporations, family trusts, as well as middle-layer, upper-layer, and top-layer Non-Banking Finance Companies registered with the Reserve Bank of India.This will promote ease of doing business by enabling InvITs and REITs to attract capital from more investors under the strategic investor category, SEBI said.