Real Estate Investment Trusts (REITs) will now be considered equity linked instruments. SEBI has changed the classification of REITs. This decision of the regulator will come into effect from January 1, 2026. This will increase investment by mutual funds and specialized investment funds (SIFs) in REITs. However, Infrastructure Investment Trusts (InvITs) will remain in the category of hybrid instruments.
SEBI issued circular on 28 November
SEBI by REITs A circular related to change in the category was issued on 28 November. It says, “From January 1, 2026 REITs Mutual funds in and SIF Any investment made by a mutual fund will be considered as investment in equity related instruments.” SEBI has banned debt schemes and SIF strategies of mutual funds till December 31, 2025. REITs Grandfathering of holding has been allowed. However, fund houses have been asked to withdraw this investment gradually depending on the market conditions and investor interest.
Mutual funds will have to be removed from your debt portfolio
“AMCs are encouraged to try to delist REITs from their debt scheme portfolios. They may do so depending on market conditions, liquidity and investor interest,” the Sebi circular said. AMFI has been directed to include REITs in its market-cap-based scrip classification framework.
REITs can be included in stock indices from July
Asset management companies will have to make changes in the scheme documents and make its information public. SEBI has clarified that these changes will not be considered as fundamental attribute changes. SEBI has also said that REITs will be included in stock indices after July 1, 2026, after the six-month transition window passes.
InvITs will remain in hybrid category
SEBI’s board in September had approved proposals to amend SEBI (Mutual Funds) Regulations, 1996 to classify REITs as ‘equity’ and retain the ‘hybrid’ classification of InvITs. This has paved the way for mutual funds and specialized investment funds to invest in REITs.
Investment of mutual funds will increase in REITs
SEBI’s note then said that after changing the classification of REITs, investments by mutual funds will be considered under investment allocation for equity instruments. It will also be allowed to be included in stock indices. This will increase the investment of mutual fund schemes in REITs.