Equity tag for Reits likely to boost new launches, deepen market

New Sebi rule boosts Reits with equity status, promising deeper liquidity, index inclusion, and broader investor participation

The Securities and Exchange Board of India’s (Sebi’s) decision to classify real estate investment trusts (Reits) as equity instruments is expected to encourage developers and sponsors to launch new Reits, said industry watchers and senior executives in the sector.

 

Quaiser Parvez, chief operating officer of the most recent Reit, Blackstone-backed Knowledge Realty Trust (KRT), said the move will improve trading volumes and price discovery. "Pathways to equity index inclusion will attract passive and active inflows, further deepening liquidity. Stronger market access and higher investor demand will also encourage developers and sponsors to launch new Reits, expanding the asset base from offices into logistics, retail, and data centres.”

 

Industry experts expect the move to broaden investor participation, improve liquidity and valuations, and deepen the Reit market. The Indian Reits Association is hopeful that stock exchanges will revise index eligibility norms to enable Reit inclusion. Earlier, the instruments were classified as hybrids.

 

Amit Shetty, chief executive officer (CEO) of Embassy Reit, India’s first listed trust, said, “It will act as a catalyst to widen investor participation, enhance liquidity, and strengthen Reits as a mainstream asset class.”

 

The classification is also set to boost investments by mutual funds and institutional players. Sebi noted that Reits share the characteristics of equities—higher liquidity and closer alignment with global market practices.

 

According to Shobhit Agarwal, CEO, Anarock Capital, the move will make the market more liquid, enable index inclusion, attract passive flows, and change investor perception of Reits from complex to simple equity assets. 

 

Currently, a mutual fund can invest up to 10 per cent of its net asset value in Reits and infrastructure investment trusts, with a 5 per cent cap for units of a single entity. To qualify as equity-oriented, at least 65 per cent of a fund’s assets must be in equities.

 

The Reit lobby also welcomed Sebi’s expansion of the ‘strategic investor’ category to enable wider participation. Earlier, many regulated institutions such as public financial institutions, insurance funds, provident and pension funds were excluded.

 

Alok Aggarwal, managing director and CEO, Brookfield India Real Estate Trust, said, “This regulatory development is poised to bolster the growth trajectory of India's Reit market, by enhancing liquidity and deepening participation. We expect this move to facilitate inclusion of Indian Reits in benchmark indices, which should bring in more investors and deepen the attractiveness of this product to broader capital markets.”

 

Ramesh Nair, MD and CEO, Mindspace Reit, said Sebi’s decisions will accelerate the next phase of growth and reinforce India’s appeal for institutional capital in yield-generating assets.

 

Under the amendment, strategic investors now include all Qualified Institutional Buyers (QIBs) such as public financial institutions, provident and PFRDA-registered pension funds with at least ₹25 crore corpus, alternative investment funds, state industrial development corporations, family trusts and Sebi-registered intermediaries with a net worth above ₹500 crore, and mid- to top-tier NBFCs registered with the Reserve Bank of India.

 

Shirish Godbole, CEO of KRT, India’s largest Reit, said Sebi's move will unlock deeper pools of capital, bring in regulatory clarity and align India with global practices, making real estate far more attractive to both domestic and international investors. "Greater participation through equity indices and mutual funds will not only improve liquidity but also reduce the cost of capital for developers."

 

India’s office real estate market is rapidly evolving into an institutionally owned asset class, driven by Reits, rising global private equity and pension fund participation, and a shift away from its fragmented, developer-led past.

 

Upcoming listings over the next two years will add to the existing four office Reits—Embassy, Mindspace, Brookfield, and KRT—plus retail-focused Nexus Select Trust. Developers such as Bagmane and Panchshil Realty are also exploring listings, with the latter in talks with US manager Blackstone.

 

Since their debut, Reits have attracted investors with stable income and rising office demand. Public Reit traded volumes jumped 399.54 per cent between FY23 and FY25 to 1.63 billion units, according to Icra. Traded value rose 177.78 per cent to ₹31,206 crore in the same period, reflecting growing investor confidence.