SEBI Explores REIT Inclusion in Indices to Boost Liquidity and Participation

SEBI Chairman Tuhin Kanta Pandey said on November 21 that the regulator is considering the calibrated inclusion of Real Estate Investment Trusts (REITs) in market indices. Speaking at the National Conclave on REITs & InvITs, he noted that the move aims to improve liquidity, visibility and institutional participation in the segment.

Why REITs and InvITs Matter?

REITs and InvITs are listed investment vehicles that pool investor money to own and operate income-generating real estate or infrastructure assets. REITs typically hold commercial properties such as office parks, while InvITs manage assets like highways, transmission lines or renewable projects. Their cash-flow-backed structures offer investors stable yields while providing asset owners a route for monetisation.

SEBI’s Plans for Mutual Fund Access

Pandey said these instruments form a “critical part of India’s next phase of infrastructure financing” and can attract both domestic and global capital if liquidity and investor participation deepen meaningfully. He added that SEBI will expand the pool of liquid mutual funds to allow exposure to REITs and InvITs, enabling fund houses to deploy larger allocations toward these instruments.

He also clarified mutual fund classifications:

• “REITs will be treated as equity,”
• “InvITs will remain categorised as hybrid instruments.”

According to Pandey, this distinction provides mutual funds “clarity and elbow room” to invest more confidently.

Index Inclusion and Market Impact

Pandey noted that index inclusion for REITs, once implemented, should naturally draw more institutional flows and strengthen secondary-market activity. The move is expected to improve visibility for REITs and enhance liquidity, making them more attractive to large investors.

Retail Participation and Communication Challenges

Retail participation in REITs and InvITs remains low despite the products offering regular distributions and regulated governance structures. Pandey emphasised the need to expand the investor base, simplify regulatory processes and improve communication, especially after SEBI’s recent survey showed individuals prefer financial information in languages they understand.

Read More: SEBI Considers Netting Settlements for FPIs to Reduce Costs and Compliance.

Conclusion

SEBI’s plan to include REITs in market indices and expand mutual fund access marks a major step toward deepening India’s capital markets. By improving liquidity and participation, the regulator aims to position REITs and InvITs as key instruments for infrastructure financing.

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.

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