SEBI Revamps Investment Rules for REITs and InvITs

SEBI reclassified Real Estate Investment Trusts (REITs) as equity-related instruments, encouraging wider participation from mutual funds and specialised investment funds. Infrastructure investment trusts (InvITs) remain hybrid instruments. Changes, effective January 1, 2026, prompt mutual fund bodies to update classifications and scheme documents while grandfathering current debt scheme investments.

The Securities and Exchange Board of India (SEBI) has announced significant changes in the classification of Real Estate Investment Trusts (REITs), now categorizing them as equity-related instruments. This move aims to bolster participation from mutual funds and specialized investment funds (SIFs).

According to the new directive, investments in REITs by mutual funds and SIFs will be regarded as investments in equity-related instruments starting January 1, 2026. Current investments will be grandfathered, allowing asset management companies to gradually divest these holdings based on market conditions and investor preferences.

The mutual fund industry body, AMFI, is expected to update the scrip classification list to incorporate REITs. Asset Management Companies (AMCs) must issue necessary amendments to scheme documents without considering it a fundamental change. Additionally, REITs can join equity indices post-July 1, 2026.

(With inputs from agencies.)