SEBI Reclassifies REITs as Equity Instruments; Aims to Increase Mutual Funds and SIFs Participation

In a circular issued on November 28, 2025, the Securities and Exchange Board of India (SEBI) has announced the reclassification of Real Estate Investment Trusts (REITs) as “equity-related instruments”. Earlier, REITs were treated differently (typically under hybrid/other categories).

Key Regulatory Changes

• Effective from January 1, 2026, any investment made by:
  • Mutual Funds
  • Specialised Investment Funds (SIFs) into REITs will be classified as equity-related investments.  
• Investments into InvITs (Infrastructure Investment Trusts) will continue to be classified as hybrid instruments.
  
• Existing REIT investments in debt mutual funds will be “grandfathered”.
  
  • Any REIT units already held by mutual fund debt schemes as of December 31, 2025, will be allowed to remain (i.e., grandfathered).
  • AMCs are encouraged (but not forced) to gradually reduce REIT exposure in debt schemes, depending on market liquidity and investor interests.
    
• REITs may be included in equity indices post a six-month buffer period, i.e., after July 1, 2026.  
• The Association of Mutual Funds in India (AMFI) has been directed to include REITs in its scrip classification based on market capitalisation and place them in the large-, mid-, or small-cap categories. 
• AMCs are required to issue addendums to update scheme documents in line with the reclassification.

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