On April 17, 2025, the Securities and Exchange Board of India (“SEBI”) released a Consultation Paper (“Consultation Paper”) aimed at reviewing and enhancing the regulatory framework governing Mutual Fund (“MF”) investments in Real Estate Investment Trusts (“REITs”) and Infrastructure Investment Trusts (“InvITs”). SEBI invites public comments on the proposals latest by May 11, 2025.
Objective of the Consultation Paper
SEBI proposes to enhance investment limits for MFs in REITs and InvITs. The primary objectives include:
- Expanding investment avenues for MF schemes;
- Providing further portfolio diversification;
- Encouraging greater capital inflow into REITs/InvITs;
- Enhancing the market base and liquidity of these instruments.
Key Proposals required under the Consultation Paper
- Proposal No. 1: Given that REITs and InvITs exhibit characteristics of both equity and debt instruments, is there a case for classifying these securities as ‘equity’? Should such classification warrant their inclusion in equity indices for the purpose of investment by MFs?
- Proposal No. 2: The Consultation Paper also invites feedback on proposals to relax the current investment restrictions on mutual fund schemes with respect to REITs and InvITs.
- Proposal No. 3: Stakeholders are encouraged to provide additional suggestions or feedback on the proposed framework.