SEBI Approves Reclassification of REITs as Equity

The Securities and Exchange Board of India (SEBI) has approved the classification of Real Estate Investment Trusts (REITs) as ‘equity’ for investments by mutual funds. At the same time, Infrastructure Investment Trusts (InvITs) will continue to be treated as ‘hybrid’ instruments for investments by mutual funds and Specialised Investment Funds (SIFs).

Amendments to Mutual Fund Regulations
To encourage higher participation in REITs, the SEBI Board approved amendments to the SEBI (Mutual Funds) Regulations, 1996, reclassifying REITs as equity. The move is being hailed as a progressive step that strengthens the REIT ecosystem in India and brings it closer to global practices, where REITs are widely included in equity indices.

What Are REITs?
REITs are investment vehicles that own or operate income-generating real estate, allowing investors to earn a share of rental or property-related income without directly buying real estate assets. Similar to mutual fund units or shares, small investors can buy REIT units in both primary and secondary markets.

India’s REIT Landscape
At present, there are five listed REITs in India — Brookfield India Real Estate Trust, Embassy Office Parks REIT, Mindspace Business Parks REIT, Nexus Select Trust, and Knowledge Realty Trust. The reclassification is expected to enhance their visibility and boost retail as well as institutional participation.