SEBI reclassifies REITs as equity instruments; surge begins
It will boost mutual fund participation, improve liquidity and pave the way for index inclusion
After the Securities and Exchange Board of India (SEBI) approved a landmark reform, reclassifying India’s five listed Real Estate Investment Trusts (REITs) as equity instruments, there has been a surge in the REITs.
The REITs are Embassy Office Parks, Mindspace Business Parks, Brookfield India Real Estate Trust, Nexus Select Trust, and Knowledge Realty Trust.
The move will boost mutual fund (MF) participation, improve liquidity, and pave the way for index inclusion.
While Embassy Office REIT gained 1.11 percent, Mindspace Business rose 1.59 percent, Brookfield India climbed 1.25 percent, Nexus Select advanced 2.03 percent, and Knowledge Realty added 1.74 percent.
On 12 September, SEBI’s board cleared amendments to the Mutual Fund Regulations, 1996, to reclassify REITs as equity while retaining the ‘hybrid’ tag for Infrastructure Investment Trusts (InvITs).
The regulator observed that REITs were more aligned with equity in structure and liquidity, making the reclassification consistent with global practices. As InvITs are largely privately placed with stable cash flows and limited liquidity, they will continue under the hybrid category.
The decision was taken after public consultations held in April 2025 and discussions with the Mutual Fund Advisory Committee, industry associations, and stakeholders.
With the modification, MF investments in REITs will now be counted under equity allocations, enabling greater participation and potential inclusion in equity indices.
Meanwhile, the existing investment limits (earlier applied to REITs and InvITs), will now be exclusively available for InvITs, fostering growth in that tranche.