In a landmark move, India’s market regulator, the Securities and Exchange Board of India (SEBI), has reclassified Real Estate Investment Trusts (REITs) as ‘equity’ for mutual fund investments. This progressive decision is expected to significantly broaden investor participation and fortify this crucial investment instrument within the Indian real estate market.
The SEBI Board recently approved amendments to its Mutual Funds Regulations of 1996, specifically re-categorizing REITs as ‘equity’ while maintaining the ‘hybrid’ classification for InvITs (Infrastructure Investment Trusts). This change is designed to enhance investment from mutual fund schemes into REITs.
The Indian REITs Association (IRA), along with leading officials from prominent listed REIT entities such as Knowledge Realty Trust (sponsored by Sattva-Blackstone), Mindspace REIT (sponsored by K. Raheja), Embassy REIT, and Brookfield India Real Estate Trust, have enthusiastically welcomed the decision. They believe it will substantially boost overall investment in the real estate sector and encourage the listing of more REITs across India.
For those unfamiliar, REITs are investment vehicles that own or operate income-generating real estate. They allow investors to earn a share of the income generated from properties without the need to directly purchase the physical assets.
The IRA emphasized that this pivotal and forward-looking step marks a significant milestone in strengthening India’s REIT ecosystem, bringing it in line with global best practices where REITs are typically included in equity indices. This reclassification is expected to significantly widen the investor base for REITs.
Currently, India hosts five listed REITs: Brookfield India Real Estate Trust, Embassy Office Parks REIT, Mindspace Business Parks REIT, Nexus Select Trust, and Knowledge Realty Trust.
Shirish Godbole, CEO of Knowledge Realty Trust, highlighted the potential benefits, stating that this progressive step will unlock deeper capital pools for India’s real estate sectors. He added, “This long-awaited move provides regulatory clarity, simplifies fund flows, and harmonizes India’s practices with international standards, making real estate significantly more appealing to both domestic and international investors.”
Ramesh Nair, MD and CEO of Mindspace REIT, shared a similar sentiment, noting that this reform will enhance liquidity, expand investor participation, and deepen the overall REIT market. He observed, “This decision, coupled with an expanded definition for strategic investors, will propel the next phase of REIT growth and solidify India’s position as an attractive hub for institutional capital in yield-generating assets.”
India’s first REIT was listed in 2019, and the total assets under management have already surpassed $2 billion, with projections to reach $4 billion by 2030.
Alok Aggarwal, MD & CEO of Brookfield India Real Estate Trust, underscored that this regulatory change will accelerate the growth trajectory of India’s REIT market by boosting market liquidity and deepening investor engagement. He anticipates that “this move will facilitate the inclusion of Indian REITs in benchmark indices, attracting more investors and further enhancing the product’s appeal within broader capital markets.”
Amit Shetty, CEO of Embassy REIT, concluded by saying, “We view this as a powerful catalyst to broaden investor participation, improve liquidity, pave the way for future index inclusion, and firmly establish REITs as a mainstream investment asset class.”
According to SEBI regulations, REITs are mandated to distribute at least 90% of their net distributable cash flows to unitholders. The IRA reported that, as of Q1 FY26, four REITs have collectively distributed over ₹24,300 crore to their unitholders.
Furthermore, a recent report released by the realtors’ apex body CREDAI and property consultant Anarock in Singapore highlighted that Indian REITs offer an impressive average yield of 6% to 7.5% for unitholders, outperforming many established global markets, including the U.S.