Mutual Fund Exposure to REITs and InvITs Grows, Yet Remains Marginal

Mutual funds’ investments in REITs and InvITs surged from ₹734 crore in March 2020 to ₹19,485 crore in March 2025, a 27x increase in 5 years.

• Despite this sharp rise, REIT and InvIT exposure stands at only 0.3% of the ₹65.7 trillion MF industry AUM, as per PRIME Database.
• MFs are allowed to invest up to 10% of AUM in these asset classes since 2017.

Market Constraints and Institutional Hesitancy

• Growth in investments has been gradual due to:
  • Limited liquidity in the REIT/InvIT market
  • Narrow investment universe (only 4 REITs and 18 InvITs)
  • Strong performance in equities, reducing the appeal of alternatives
  • Lack of analytical and evaluation capabilities at many fund houses
• Only 22 out of ~45 AMCs currently invest in REITs and InvITs.
• SBI, ICICI Prudential, and HDFC account for 77% of total MF exposure, with ICICI Prudential leading at ₹5,200 crore.

Index and Performance Benchmark

• The Nifty REITs & InvITs Index, launched in 2023, has shown:
  • 8.5% total return in 1 year
  • ~16% annualized returns over 5 years

SEBI Proposals to Enhance Participation

• The market regulator SEBI proposed:
  • Raising the investment cap from 10% to 20% for equity and hybrid MF schemes
  • Increasing single issuer exposure limit from 5% to 10%
• Other suggestions include:
  • Classifying REITs/InvITs as equity
  • Allowing MFs to launch dedicated schemes
• However, SEBI’s Mutual Fund Advisory Committee is not in favor of some of these changes.

Real Estate AIFs See Robust Growth

• Alternate Investment Funds (AIFs) invested ₹73,903 crore in real estate during 9MFY25, the highest among all sectors, up 8% from FY24-end.
• This represents 15% of total AIF investments, which stood at ₹5.06 trillion across sectors like IT, financial services, NBFCs, banks, and pharma.

BS