What Does SEBI’s Move To Classify REITs And InvITs As Equity Instruments Mean For Indian Investors?

The way REITs and InvITs are positioned within the Indian investment ecosystem has changed significantly as a result of this action. Since SEBI classified them as equity instruments, they are now more comparable to popular investment vehicles like stocks and equity mutual funds.

For investors, this enhances visibility and trust - making it easier to include REITs and InvITs in personal portfolios as structured, regulated, and liquid alternatives to physical property investment. More significantly, it draws attention to these tools for goal-based investment planning, particularly for investors seeking professionally managed real estate or infrastructure assets that offer both consistent income and long-term value growth.

As per an interview with Mr. Pakshal Sanghvi - Director of Sanghvi Realty, here's how the Indian investors will benefit from SEBI's decision to classify REITs and InvITs as equity instruments.

1. What impact can this reform have on mutual fund allocations and index inclusions? Do you expect more institutional capital to flow into these instruments now?

It is anticipated that increased institutional participation will result from this categorization. REITs and InvITs will now be required to be included in the portfolios of mutual funds particularly equity schemes and ETFs in order to improve overall allocation and passive flows.

From an indexation perspective, equity classification allows these instruments to become part of broader market indices, improving visibility and demand from both institutional investors and index-tracking funds.

We expect a definite uptick in capital inflows - both domestic and foreign - as REITs and InvITs are now likely to be evaluated through the lens of risk-adjusted returns, similar to other equity assets.

2. From a developer's perspective, how does this move improve capital access or market trust in the real estate and infrastructure space?

As developers, we perceive this as a structural change that enhances capital market efficiency and trustworthiness. Being categorized as equity gives a new degree of investor comfort and visibility to REITs and InvITs, which were already regulated and transparent instruments.

Developers will find it simpler to monetize assets that generate revenue and reinvest in new projects as a result of this reform, which is expected to open up bigger retail and institutional capital pools. It encourages a more robust capital cycle, lessens an excessive dependence on debt, and enables more transparent and disciplined scaling.

Additionally, it indicates that Indian infrastructure and real estate are developing into an ecosystem that is conducive to investment and is professionally managed.

3. While REITs and InvITs are exchange-traded like stocks, do you think retail investors still hesitate to consider them? What will drive adoption from here on?

Despite being listed on stock exchanges, REITs and InvITs have not yet achieved broad retail acceptability. This is mostly due to ignorance and the idea that they are difficult or only for institutions.

However, this move can change that. With mutual funds now expected to increase allocation, more media and platform coverage, and potential inclusion in standard advisory portfolios, investor familiarity will improve rapidly.

What will drive adoption next is:

• Ease of access via online platforms
• Clearer communication about income potential and tax treatment
• Continued regulatory backing that builds trust in their long-term stability

4. How do you see this reform changing the future of commercial real estate and infra financing in India over the next 5 years?

For the infrastructure and commercial real estate industries, this is a revolutionary step. We anticipate that REITs and InvITs will emerge as the go-to vehicles for capital recycling and asset monetization over the course of the next three to five years.

Developers will increasingly build assets with the intention to list them under REIT/InvIT structures, which improves project discipline, tenant quality, and overall transparency. For infrastructure, InvITs provide a consistent and predictable way to fund long-gestation projects - which fits well with India's growing infra ambitions.

This reform lays the foundation for long-term retail and institutional capital to support India's urbanisation and infrastructure vision.

5. Given that retail investors will now play a larger role in REIT and InvIT participation, how important is accessibility and liquidity in making these instruments viable? From a developer's standpoint, how can this reform help channel more retail capital into real estate and infra projects?

Accessibility and liquidity are non-negotiable if we want to encourage wider retail participation. Investors need to be able to enter and exit with ease - and feel confident that their money is invested in regulated, income-generating assets.

From a developer's point of view, this opens up a completely new investor base - one that was earlier limited to either end-users or institutional buyers. By using REITs and InvITs, we now have the opportunity to tap into household-level capital through the equity markets - which is more sustainable, lower-cost, and transparent.

With the right investor education and performance consistency, retail capital can become a strong funding pillar for India's next wave of real estate and infrastructure development.

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