SEBI has issued a consultation paper proposing major reforms for REITs and InvITs, including the ability to acquire minority stakes in under-construction assets. The changes aim to build stronger asset pipelines and improve operational liquidity. Public comments on these proposals are open until August 27, 2026.
The Securities and Exchange Board of India (SEBI) released a consultation paper on August 6, 2026, outlining proposed reforms to modernize the regulatory framework for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). These changes are intended to simplify business operations and provide these investment vehicles with more flexibility to manage their portfolios and future growth strategies.
Expanding Investment Scope
One of the most significant proposals is to allow REITs and InvITs to acquire minority stakes in assets that are currently under construction. Currently, these trusts primarily focus on completed, income-generating projects. By permitting minority investments without the requirement for controlling interest, SEBI aims to help these entities secure a pipeline of future revenue-generating assets.
However, this shift introduces a new risk profile for unitholders. Unlike operational assets that provide immediate cash flow, projects under construction are subject to execution delays, cost overruns, and development risks. Investors may need to track how individual trusts manage these risks and whether such investments impact overall distribution yields.
Governance and Voting Changes
SEBI has proposed a change to the unitholder approval threshold. The regulator suggests moving from the current requirement of 75% of total unitholder value to 75% of the votes actually cast. This modification could simplify decision-making processes, particularly in cases where voter turnout is low, though it may also shift the influence dynamic among investors. The consultation paper also looks at clarifying the exit-offer framework, particularly in situations involving a change in the sponsor of the trust.
Liquidity and Operational Ease
To improve liquidity for privately listed InvITs, SEBI has proposed reducing the cooling-off period for Offer for Sale (OFS) transactions from 12 weeks to 8 weeks. Privately placed InvITs often face challenges with high trading lot sizes and lower participation, so this adjustment is designed to help unit holders exit or trade more efficiently.
Additionally, the regulator intends to broaden the definition of real estate under REIT regulations to include remote common infrastructure, such as captive renewable energy facilities. This move is aimed at resolving past inconsistencies in how these assets are categorized. In a separate recent development, the regulator has also proposed allowing REITs and publicly listed InvITs to issue Depository Receipts (DRs) to foreign investors, which could open new avenues for capital raising.
SEBI has invited public feedback on these proposals until August 27, 2026. The final regulations will depend on the feedback received and the subsequent notification from the regulator. Investors and market participants will monitor the final guidelines to understand the specific compliance requirements and the impact on the long-term asset quality of these trusts.