Context:
The Securities and Exchange Board of India (SEBI) has revised mutual fund regulations to explicitly classify units of Real Estate Investment Trusts (REITs) as equity instruments. This change allows fund houses to include REIT units in their equity portfolios under specified limits.
Key Highlights:
- Permissible Investment: Mutual funds can now invest up to 10% of a scheme’s corpus in units of a single REIT issuer.
- Approval: The SEBI board approved the amendment at its September 2025 meeting.
- Objective: To provide clarity on the treatment of REIT units in mutual funds and facilitate diversified exposure to real estate within equity schemes.
About Real Estate Investment Trusts (REITs)
A Real Estate Investment Trust (REIT) is a collective investment vehicle that pools money from investors to own, operate, or finance income-generating real estate assets such as office buildings, malls, hotels, and warehouses.
REITs function similar to mutual funds — but instead of investing in stocks or bonds, they invest in real estate properties.
Regulatory Framework:
- Regulated by: Securities and Exchange Board of India (SEBI)
- Introduced in India: 2014 under SEBI (Real Estate Investment Trusts) Regulations, 2014
- Structure: A REIT is typically structured as a trust, registered with SEBI.
- Key Participants:
- Sponsor(s): Promote and set up the REIT.
- Trustee: Holds assets on behalf of investors.
- Manager: Manages REIT operations and investments.
Implications:
- Encourages mutual fund participation in REITs, potentially boosting liquidity and investor interest in the real estate investment segment.
- Aligns with SEBI’s broader aim to expand investment options and promote portfolio diversification within mutual fund schemes.
