SEBI has proposed allowing REITs and InvITs to acquire minority stakes in third-party projects, including those under construction. This change aims to provide developers with fresh capital without requiring them to give up control immediately. Investors should note that the regulator is inviting public feedback on these rules until August 27, 2026.
The Securities and Exchange Board of India (SEBI) has released a consultation paper that could change how infrastructure and real estate projects in India are funded. On August 6, 2026, the regulator proposed allowing Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) to acquire minority stakes in third-party projects, including those still under construction. Currently, these trusts are generally required to hold a controlling interest in the special purpose vehicles (SPVs) they invest in. This new framework aims to offer a flexible alternative for both developers and the trusts themselves.
Accessing Capital Without Losing Control
For many developers, raising money often involves selling a significant portion of an asset, which can mean losing strategic or operational control. The proposed rules would allow developers to monetize a part of an asset while keeping the rest. This provides immediate cash for land, construction, or debt repayment while letting the developer continue to manage the project.
For REITs and InvITs, the benefit lies in building a stable asset pipeline. Instead of waiting for a project to be fully completed and ready for a full-scale acquisition, these trusts can now enter at an earlier stage. This creates a clear path to secure future, high-quality assets that fit their long-term investment strategies.
Governance and Risk Considerations
While the proposal opens new doors for capital, it also introduces challenges that regulators are aiming to address. A minority stake means the REIT or InvIT may have less say in daily operational decisions or capital spending compared to full ownership. To mitigate this, SEBI has included conditions such as a mandatory 'glide path.' This implies a clear, binding agreement between the trust and the developer on how and when the trust will eventually move from a minority stake to full control or ownership.
Investors may monitor the governance structures, as conflicts between minority investors and developers can occur. SEBI has also proposed changing the unitholder approval threshold, moving from 75% of all unitholders to 75% of the total votes cast. This is designed to make decision-making more efficient for trusts. However, the final impact will depend on the strength of shareholder agreements and the transparency of disclosures at the project level.
Next Steps for Market Participants
The REIT and InvIT market in India has seen significant growth, with cumulative distributions and assets under management reaching multi-trillion rupee levels. Because this proposal is still in the consultation phase, it does not immediately change how these trusts operate. The regulator is seeking public comments until August 27, 2026. Investors and market observers may track the final regulations to understand the specific guardrails, such as the maximum investment limits and the strict criteria for which projects qualify for such investments.