Context:
Mutual funds’ investments in REITs and InvITs surged from â‚ą734 crore in March 2020 to â‚ą19,485 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 â‚ą65.7 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 â‚ą5,200 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 â‚ą73,903 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 â‚ą5.06 trillion across sectors like IT, financial services, NBFCs, banks, and pharma.
