SEBI reclassifies REITs as equity related instruments – Law.asia

The Securities and Exchange Board of India (SEBI) has released a circular reclassifying real estate investment trusts (REITs) as equity related instruments to enhance participation of mutual funds and specialised investment funds. Amendments to the SEBI (Mutual Funds) Regulations, 1996, take effect on 1 January 2026. However, infrastructure investment trusts are still classified as hybrid instruments for investment by mutual funds and specialised investment funds. Investments in REITs until 31 December 2025 by debt schemes of mutual funds and investment strategies of specialised investment funds will be grandfathered. This means these investments are exempt from amendments. However, the circular encourages asset management companies (AMCs) to divest REITs from debt scheme portfolios, considering market conditions, liquidity and the interest of investors. AMCs are also required to issue necessary addendums making changes in the scheme documents to comply with the reclassification, but they will not alter the fundamental attributes. The Association of Mutual Funds in India will include REITs in the classification list of scrips as per their market capitalisation, in accordance with the 27 June 2024 circular. Any inclusion of REITs in equity indices will be completed after 1 July 2026.
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