Sebi reclassifies REIT as equity to promote market participation

New Delhi: Market regulator Sebi on Friday reclassified Real Estate Investment Trusts (REITs) as equity-related instruments to promote higher participation by mutual funds and specialised investment funds (SIFs).

It further said that infrastructure investment trusts (InvITs) will continue to be classified as hybrid instruments.

“With effect from January 1, 2026, any investment made by mutual funds and SIFs in REITs shall be considered as an investment in equity-related instruments,” Sebi said in its circular.

Existing REIT investments held by debt schemes and SIF strategies as of December 31, 2025, will be grandfathered, though AMCs are encouraged to gradually divest them based on market conditions and investor interest.

Mutual fund body industry body AMFI will update the scrip classification list to include REITs, and AMCs must issue an addendum to update scheme documents — this will not count as a fundamental change.

Additionally, REITs can be added to equity indices only after July 1, 2026, the regulator said.

In September, the regulator’s board approved the amendments to SEBI (Mutual Funds) Regulations, 1996, for reclassifying REITs as “equity” and retaining the “hybrid” classification for the InvITs, for the purpose of investments by mutual funds and specialised investment funds.