SEBI Notifies REIT Reclassification Effective Jan 1, Invits To Remain Hybrid

2025-11-28 11:00:41

(MENAFN- IANS) New Delhi, Nov 28 (IANS) The Securities and Exchange Board of India (SEBI) said on Friday that Real Estate Investment Trusts would be treated as equity-related instruments from January 1, 2026, onwards, which would attract more mutual funds and Specialised Investment Funds participation.

It has set Friday as the deadline for the updated framework to come into effect.

In an official circular, the market regulator also said Infrastructure Investment Trusts (InvITs) shall, however, be treated as hybrid instruments.

Under the new classification, the SEBI said that with effect from January 1, 2026, any investment made by Mutual Funds and SIFs in REITs shall be treated as an investment in an equity-related instrument.

REIT units that are already held as of December 31, 2025, by debt schemes of Mutual Funds and SIF strategies have been granted grandfathering by SEBI.

While these holdings won't require an immediate restructuring, the fund houses have been encouraged to divest these gradually based on liquidity, market conditions, and investor interest.

According to the circular, AMCs have been asked to make efforts to divest REITs from their respective portfolios of debt schemes, considering the market conditions, liquidity, and interest of investors.

Accordingly, the SEBI instructed the Association of Mutual Funds in India (AMFI) to include REITs in its market-cap-based scrip classification system, in conformity with the Mutual Fund Master Circular.

AMCs will also issue addenda to update scheme documents-changes which the SEBI clarified would not be treated as modifications to fundamental attributes.

The SEBI further stated that REITs would be considered for inclusion in equity indices only after July 1, 2026, thus providing a six-month transition time for the ecosystem to adjust.

This follows a meeting of the SEBI's board in September, where it approved amendments to the SEBI (Mutual Funds) Regulations, 1996-reclassifying REITs as "equity" for investment purposes, retaining InvITs under "hybrid".

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