An IFSCA expert committee has proposed introducing Mortgage REITs in GIFT-IFSC to expand real estate financing. The recommendations aim to unlock capital through securitization and attract global investors via dual listings and tax incentives. This framework seeks to align GIFT City's investment structures with international standards to boost liquidity in the real estate sector.
An expert committee led by former SEBI whole-time member Ananta Barua has unveiled a blueprint to transform the real estate and infrastructure financing landscape at GIFT City’s International Financial Services Centre. The proposals focus on introducing new investment structures and streamlining regulations to attract both domestic and international capital.
The Move Toward Mortgage REITs
At the heart of the committee’s recommendations is the introduction of Mortgage REITs, or mREITs, to the IFSC. Unlike traditional REITs that focus on owning and operating commercial properties, mREITs function more like fixed-income vehicles. These entities earn revenue primarily from interest on mortgage-backed securities and real estate loans. For investors, this creates a mechanism similar to debt financing, where profitability is driven by the net interest margin—the spread between interest earned on mortgage assets and the cost of the debt used to fund them. By enabling banks and non-banking financial companies to securitize their loan books, the proposal aims to free up capital that is currently tied to long-term property lending.
Expanding Investment Formats
The committee has also proposed a wider array of investment vehicles, including Green REITs and Small and Medium REITs, to broaden the appeal of the IFSC. By proposing 'mixed' and 'global' REIT structures, the committee intends to allow asset owners to consolidate portfolios that span across different countries. This would provide investors with greater diversification, a strategy already utilized in established financial hubs such as the United States, Australia, and the United Kingdom.
Regulatory and Tax Integration
To increase liquidity and global participation, the report suggests allowing SEBI-registered REITs and InvITs to list on GIFT-IFSC exchanges through depository receipts or secondary listings. This dual-listing model is designed to give Indian trusts direct access to international institutions and non-resident Indian investors.
Furthermore, the panel has suggested significant changes to the tax and regulatory framework to ensure competitiveness. Key recommendations include granting tax parity between trusts registered with the IFSCA and those under SEBI. The committee also proposed that foreign-sourced income from offshore investments should be exempt for non-resident unitholders, mirroring the tax treatment currently provided to certain Alternative Investment Funds. Additionally, the committee seeks to relax existing sectoral caps and lock-in requirements for investments made by IFSC-based trusts into Indian equities, aiming to remove barriers for sponsors looking to leverage GIFT City as a base for cross-border investments. The eventual implementation of these proposals will depend on collaboration between the IFSCA, the Ministry of Finance, and SEBI, as well as necessary amendments to the Income Tax Act.