SEBI Eyes Index Inclusion for REITs, InvITs to Boost Liquidity and Participation

SEBI Chairman Tuhin Kanta Pandey on Friday said the markets regulator is actively examining the inclusion of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) in major market indices. He described this as a calibrated glide path aimed at improving liquidity, visibility, and institutional participation in these instruments.

The move is seen as the most significant policy signal yet for India’s emerging REIT-InvIT ecosystem, which SEBI believes must play an increasingly important role in financing the country’s long-term infrastructure requirements.

REITs and InvITs Need Deeper Liquidity and Wider Participation

Speaking at an event in New Delhi, Pandey emphasised that expanding market access and liquidity for these instruments has now become a priority.

He noted that India is currently the fourth-largest REIT market in Asia, but the overall depth of the segment remains limited. Key challenges include:

• Retail penetration of just 1%

• Insufficient liquidity in domestic REITs and InvITs

As of October, the combined Assets Under Management (AUM) of REITs and InvITs stood at ₹9.25 trillion, spread across 24 listed InvITs and multiple listed REITs.

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SEBI Evaluating Multiple Reforms in Parallel

Pandey said SEBI is studying a number of policy changes simultaneously to strengthen the ecosystem. These reforms include:

• Expanding the pool of liquid mutual funds allowed to invest in REITs and InvITs

• Classifying REITs as equity to help improve liquidity

• Lowering investment thresholds to make the products more accessible

• Broadening the investor base, particularly encouraging large NBFCs to participate as anchor investors

The chairman stressed that bringing in more categories of investors is essential to driving growth in the segment.

Capital Markets Will Play a Bigger Role in India’s Infra Build-Out

Pandey highlighted that India’s next phase of infrastructure expansion will increasingly depend on capital markets for funding. In this context, REITs and InvITs are expected to play a central role.

According to NabFiD estimates cited by the SEBI chief, India will require ₹700 trillion in core sector investments by 2047. This projection is driven by rising power demand and expansion in urban transport systems.

Investor Communication Must Become More Accessible

While reiterating that governance and investor protection remain non-negotiable, Pandey added that the wider adoption of these instruments will also depend on better communication strategies.

Investor surveys show that people prefer financial information in languages they understand. This, he said, underscores the need for more accessible awareness and outreach initiatives to improve understanding and participation in REITs and InvITs.

Disclaimer

Views expressed by investment experts mentioned in the source article are their own. Users should consult certified professionals before making investment decisions.

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