Whalesbook
SEBI's Strategic Push for REIT and InvIT Flexibility
The Securities and Exchange Board of India (SEBI) is advancing its agenda to foster greater ease of doing business for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) [2, 12]. Proposals released on Thursday aim to significantly expand investment possibilities and streamline operational frameworks, moving beyond basic liquidity management to unlock enhanced yield potential and strategic agility for these critical investment vehicles. These reforms, open for public comment until February 26, are a continuation of SEBI's broader initiative to modernize India's capital markets and improve their attractiveness to domestic and international investors [5, 26].
Easing Investment Horizons and Operational Constraints
Central to the proposed changes is the widening of investment options for REITs and InvITs in liquid mutual fund schemes. Currently restricted to only the highest credit-rated funds, these trusts will gain the flexibility to invest across a broader spectrum of liquid schemes. This move is intended to improve treasury management and optimize returns on idle cash without materially increasing risk [2, 12, 13].
A significant operational enhancement proposed is allowing InvITs to retain holdings in Special Purpose Vehicles (SPVs) even after concession agreements expire. This addresses a long-standing regulatory ambiguity, acknowledging that SPVs often need to continue functioning to meet legal, contractual, or tax obligations. By permitting this continuity, SEBI aims to facilitate better long-term asset monetization and enhance income stability for investors, a practical step aligned with global infrastructure financing practices [3, 12].
Fostering Greenfield Development and Financial Maneuverability
The proposals also seek to stimulate growth in the infrastructure sector by harmonizing rules for private InvITs with those applicable to public InvITs concerning greenfield projects. This will enable privately listed InvITs to invest up to 10% of their asset value into pure greenfield projects, potentially unlocking new development pipelines [2, 3, 13].
Furthermore, SEBI intends to broaden the permissible uses of fresh borrowings for InvITs when their net debt exceeds 49% of their assets. This expanded scope could allow for capacity augmentation, performance enhancements, and refinancing of existing debt, offering greater financial maneuverability for strategic expansion and capital efficiency [2, 3, 13].
Market Context and Analyst Outlook
These proposed regulatory adjustments align with a positive market backdrop for REITs and InvITs. In 2025, these trusts significantly outperformed traditional benchmarks, with REITs delivering 29.68% returns and Power InvITs advancing 20.22% [7]. SEBI has been progressively reforming the sector, with past measures including expanding the definition of strategic investors and reclassifying REITs as equity-like instruments to attract wider participation from mutual funds and institutional investors [10, 15].
Experts view these proposals as timely and beneficial. Vivek Rathi, National Director-Research at Knight Frank India, noted that these "ease of doing business measures...come at a very timely moment for India's real estate and infrastructure capital markets," crucial for attracting long-term capital in a post-higher interest rate environment [12]. Sumeet Bhatia, Managing Director-Capital Market Services at Savills India, described the SPV continuity proposal as "practical and forward-looking" [12]. The Indian real estate and infrastructure sectors are experiencing disciplined growth, supported by government spending and stable macroeconomic conditions, creating a favorable environment for such enhancements [4, 22, 38]. Concurrently, the Reserve Bank of India is also proposing to permit banks to lend to REITs, signaling a broader regulatory intent to support the sector [36]. These combined efforts aim to strengthen the framework, reduce capital costs, and boost investment inflows into India's real estate and infrastructure financing vehicles.
Historical Context and Global Alignment
SEBI has been consistently evolving the regulatory landscape for REITs and InvITs since their introduction in 2014, aiming to harmonize them with global best practices [11, 14, 15, 19, 39]. Previous reforms have focused on expanding the investor base, simplifying processes, and enhancing corporate governance [15, 21]. The current proposals build on this trajectory by increasing operational flexibility, mirroring a global trend where debt flexibility is common in mature infrastructure financing markets [3, 14]. The regulatory clarity and expanded scope are expected to further democratize access to these asset classes and attract significant capital [15].