Classification of REITs as Equity to Boost Investment in Indian Real Estate Industry
The recent decision by SEBI to classify Real Estate Investment Trusts (REITs) as 'equity' for mutual fund investments marks a significant and progressive step for India's real estate investment landscape. This regulatory shift is expected to broaden investor participation, strengthen the REIT market, and accelerate investment flows into the real estate sector.
What Are REITs?
REITs are investment vehicles that own or operate income-generating real estate assets. They allow investors to earn a share of the income produced by these properties without having to purchase or manage the properties directly. This structure democratizes real estate investments, offering steady income distribution along with capital appreciation potential.
Industry Response to SEBI's Decision
The Indian REITs Association (IRA), alongside leading REIT entities such as Sattva-Blackstone's Knowledge Realty Trust, K Raheja-sponsored Mindspace REIT, Embassy REIT, Brookfield India Real Estate Trust, and Nexus Select Trust, have hailed SEBI's decision as a milestone that aligns India with global best practices, where REITs form part of equity indices.
The IRA noted this reclassification will deepen the Indian REIT market, enhance liquidity, widen investor participation, and likely lead to more REIT listings in the country.
Key Benefits and Perspectives
Shirish Godbole, CEO of Knowledge Realty Trust, emphasized that this move unlocks deeper pools of capital for India's real estate sector by bringing regulatory clarity and simplifying fund flows. He highlighted that aligning India's REIT regulations with global standards would make real estate more attractive for both domestic and international investors.
Ramesh Nair, MD and CEO of Mindspace REIT, pointed out that the reform will broaden investor participation and strengthen market depth, accelerating the next phase of growth for REITs and positioning India as an appealing destination for institutional capital in yield-generating assets.
Alok Aggarwal, MD & CEO of Brookfield India Real Estate Trust, mentioned the potential for greater market liquidity and investor participation, expecting the move to pave the way for Indian REITs' inclusion in benchmark indices — a step that would attract more investors and deepen market interest.
Amit Shetty, CEO of Embassy REIT, described the decision as a catalyst that would enhance liquidity, broaden investor participation, enable future index inclusion, and establish REITs as a mainstream investment asset class.
Regulatory Requirements and Performance
According to SEBI regulations, REITs must distribute at least 90% of their net distributable cash flows to unitholders. The IRA highlighted that four listed REITs in India have cumulatively distributed over Rs 24,300 crore to unitholders up to the first quarter of FY26.
Currently, India has five listed REITs:
Brookfield India Real Estate Trust
Embassy Office Parks REIT
Mindspace Business Parks REIT
Nexus Select Trust
Knowledge Realty Trust
A recent report by CREDAI and Anarock, released in Singapore, revealed that Indian REITs generate an average yield of 6% to 7.5% for unitholders — a return superior to many mature markets, including the United States.
Conclusion
SEBI's reclassification of REITs as equity signals a new era for the Indian real estate sector by unlocking institutional capital, enhancing market liquidity, and encouraging the growth of REIT instruments. This regulatory clarity and alignment with global best practices promise to make Indian real estate investments more accessible, liquid, and attractive to a broad range of investors, fueling the industry's growth and contributing to economic development.