How Sebi's proposal may let developers raise funds without selling projects

Proposal to allow Reits and Invits to take minority stakes in third-party projects could help developers unlock capital while retaining control

India’s infrastructure and real estate developers could soon have another way to raise capital without selling an asset outright. The Securities and Exchange Board of India (Sebi) has proposed allowing real estate investment trusts (Reits) and infrastructure investment trusts (Invits) to take minority stakes in third-party projects, including those under construction.

 

"Investing a minority stake in under-construction assets would enable Reits and Invits to build a pipeline of stable, revenue-generating assets while minimising exposure to construction-related risks," Sebi said in its consultation paper.

Why developers could find the model attractive

The proposed framework could allow developers to sell a minority stake in an eligible project to a Reit or Invit, giving them access to capital while retaining a stake in the asset and, potentially, control over it.

 

 

“If Reits and Invits are able to participate without necessarily acquiring control, developers could monetise a part of an asset, unlock capital and redeploy it into new projects while continuing to retain meaningful ownership,” Karan Mehta, executive director, projects, Orion One32, told Business Standard.

 

According to Mehta, the capital released could be used to acquire new land, fund construction, repay debt or invest in other projects. The bigger benefit, he said, would be better capital efficiency, allowing developers to put the same pool of money to work across multiple projects.

 

Anish Maheshwari, founder and CEO, Vsure Investment Affairs, said the proposal could offer a middle ground between taking on more debt and giving up ownership. “While maintaining operational and strategic control, developers may access funds from operational assets,” he said.

 

The proposal comes as the Reit and Invit market has expanded rapidly. Invits distributed ₹22,769 crore in FY26, taking cumulative distributions since inception to ₹91,000 crore, while assets under management rose to ₹7.1 trillion from ₹6.3 trillion in FY25, according to the Bharat InvITs Association. The listed Reits' market capitalisation rose from ₹271 billion in FY20 to ₹1.726 trillion in the first nine months of FY26, according to CBRE.  Check - TOP GAINERS NSE | TOP LOSERS NSE

Where could the money flow?

According to Maheshwari, the proposal is likely to be most relevant for assets with predictable cash flows and a clear path to generating income. In infrastructure, that could include roads, renewable-energy projects and power transmission assets. In real estate, Grade A offices, business parks, logistics and warehousing facilities, data centres and some retail developments could attract interest.

 

“These sectors already have institutional investor interest, and minority investments will enable developers to monetise operational assets while continuing to build and manage them,” Maheshwari said.

 

The proposal could also allow Reits and Invits to participate in projects at an earlier stage of their life cycle.

 

Ram Raheja, managing director, S Raheja, told Business Standard that the consultation paper should be seen as an attempt to bring institutional capital into projects before they are fully stabilised. Until now, he said, participation in under-construction projects was limited by the requirement to hold a controlling interest. Allowing minority participation could give developers access to longer-term capital that sits between construction debt and private equity.

 

In real estate, Raheja expects office and logistics assets, as well as commercial components of larger mixed-use developments, to be among the early beneficiaries, particularly where there is a clear path to rental income.

A middle path for developers

For developers, debt, private equity and outright asset sales are among the main ways to raise capital. While debt allows developers to retain ownership, it increases leverage and creates repayment obligations. Private equity provides growth capital, but generally comes with return expectations and an eventual exit. An outright asset sale provides immediate liquidity, but that means giving up the asset altogether.

 

According to the industry leaders, a minority Reit or Invit investment could potentially offer a middle ground. “A developer can unlock capital without necessarily taking on additional debt or completely exiting a quality asset,” Mehta said.

 

Maheshwari said the structure could become particularly useful for businesses pursuing long-term expansion because it combines capital access with continued participation in future value creation.

 

This could make capital recycling one of the most important implications of the proposal. Developers would not necessarily have to wait for a complete portfolio sale before releasing capital tied up in operational or developing assets.

 

The government has already identified Reits and Invits as important channels for asset monetisation. A March 2026 PIB backgrounder said asset monetisation through these vehicles had unlocked more than ₹1.5 trillion, helping recycle funds into new projects and attract global investors.

Are there any risks?

A Reit or Invit that owns only a minority interest will have less control over decisions affecting the underlying asset. That could include capital expenditure, refinancing, distributions, related-party transactions and operational decisions.

 

“Rather than asset quality, governance is the main issue,” Maheshwari said. Minority investors have less control over capital allocation and operational choices, making transparency and accountability important where sponsor and investor interests could diverge.

 

Independent valuations, board involvement, veto rights on important decisions, stricter related-party transaction rules and greater disclosure at the special purpose vehicle level could therefore become important safeguards, he said.

 

Raheja said institutional investors would also need comfort on execution, governance, delivery timelines and the eventual route to control, particularly when investing in projects that are still under construction.

 

According to the experts, if implemented with appropriate safeguards, it could create a new asset-monetisation route in which developers unlock capital, retain meaningful ownership and recycle funds into their next projects.