IRDAI May Raise Combined REIT and InvIT Investment Limit for Insurers to 6%: Reports

The IRDAI is considering a proposal that could allow insurance companies to increase their exposure to Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).

The discussions come after strong investor participation in recent infrastructure investment offerings, including the ₹6,000 crore Raajmarg InvIT issue backed by the National Highways Authority of India (NHAI).

At present, insurers can invest up to 3% each in REITs and InvITs. Under the new proposal being examined, insurers may get a combined exposure limit of 6%, giving them greater flexibility to allocate funds between the two asset classes based on market opportunities.

Why REITs and InvITs Are Attracting Interest

REITs and InvITs have increasingly become popular among institutional investors because they offer relatively stable cash flows and long-term yield potential.

While REITs mainly invest in income-generating real estate assets such as office parks and commercial properties, InvITs own infrastructure assets like highways, transmission lines, and renewable energy projects.

For insurance companies, which typically manage long-term liabilities, these instruments can provide predictable returns over extended periods.

The recent Raajmarg InvIT issue reportedly offered yields close to 12% at a time when India’s 10-year government bond yield stood around 6.95%, making the offering particularly attractive for long-term investors.

Strong Participation From Insurance Companies

According to reports, insurance companies accounted for nearly 20% to 25% of the ₹6,000 crore Raajmarg InvIT issue despite operating under existing investment restrictions.

Several insurers have also participated in listed REITs such as Embassy Office Parks REIT and Mindspace Business Parks REIT in recent years.

Industry participants believe high-quality REIT and InvIT structures can help insurers diversify portfolios while generating stable long-term income.

Proposal Still Under Discussion

Sources indicate that discussions within IRDAI are still at an early stage, and any formal implementation may take time.

If approved, the revised norms could improve capital flows into India’s infrastructure and commercial real estate sectors while giving insurers greater investment flexibility in yield-generating assets.

Read more: No Pay, No Play: How Lenders Could Soon Freeze Your Phone Over Missed EMIs.

Conclusion

IRDAI’s proposal to relax investment norms for REITs and InvITs reflects growing institutional interest in long-duration income-generating assets. With infrastructure financing needs rising and insurers seeking stable returns, a combined investment cap could create greater flexibility for the sector while supporting long-term capital formation in India’s economy.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.