In September 2025, the Securities and Exchange Board of India (SEBI) approved amendments to a number of regulations. These include the SEBI (Real Estate Investment Trusts) Regulations, 2014 (REIT regulations) and the SEBI (Infrastructure Investment Trusts) Regulations, 2014 (InvITs regulations). The amendments are significant in opening up India’s alternative investment market and democratising access to infrastructure and real estate assets.
Parag Bhide
Partner
Bharucha & Partners
They follow the SEBI’s August 2025 consultation paper based on the recommendations of its Hybrid Securities Advisory Committee and public feedback. The changes reflect the SEBI’s commitment to aligning India’s investment trust framework with global best practices while addressing domestic market requirements and investor protection concerns.
The definition of strategic investor has been expanded. The concept was introduced in the REITs and the InvITs regulations to enable investments by strategic investors prior to a public issue, creating confidence in the public issue of units by an REIT or InvIT. Before the amendment, the definition of strategic investors included qualified institutional buyers (QIB) but excluded regulated institutional investors, such as pension funds, provident funds and alternative investment funds. The limitation restricted the breadth of institutional participation during the critical early stages of REIT and InvIT launches.
The amendments expand the classes of strategic investors. Regulation 2(1)(ztb) of the REITs regulations and regulation 2(1)(zza) of the InvITs regulations now include all QIBs under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018. Strategic investors still have to invest between 5% and 25% of the total offer size. They receive preferential allocations before public subscriptions commence, and remain subject to a 180-day lock-in period from the date of listing. However, individuals, corporate bodies and family offices are not classified as strategic investors. This ensures that only regulated institutional entities benefit from strategic investor status.
The SEBI proposes reclassifying REITs as equity instruments while maintaining InvITs as hybrid. This distinction acknowledges that REITs have higher liquidity and growth potential as well as share equity-like features, while InvITs retain debt-like stability characteristics. For institutional investors, the reclassification opens up new opportunities for portfolio diversification. It will attract greater mutual fund participation within equity allocation limits because of the REITs’ reclassification. Of note is that the existing investment limits applicable to both REITs and InvITs will in future apply only to InvITs. This will facilitate growth in this segment. Such regulatory clarity will remove ambiguities that previously discouraged mutual fund investments in REITs and enable fund managers to optimise their portfolios more effectively.
According to the SEBI’s latest data, some five REITs and 23 InvITs are listed on Indian stock exchanges with cumulative assets under management exceeding INR9 trillion (USD10.14 billion). This substantial asset base demonstrates the growing acceptance and maturity of these investment vehicles. The expanded strategic investor definition will increase participation from the wider institutional investor base, attracting significant new capital inflows to upcoming REIT and InvIT offerings.
The SEBI’s expansion of the strategic investor definition is a fundamental shift from niche institutional products to mainstream investment vehicles accessible to a broader range of sophisticated investors. The changes will provide more opportunities, attracting additional liquidity and investments. Including pension funds and insurance companies as strategic investors is significant. The long-term investment horizons of these regulated entities complement the enduring nature of real estate and infrastructure assets underlying REITs and InvITs.
These reforms position India’s REITs and InvITs as part of the global alternative investment structure. They support the country’s infrastructure development through increased participation in capital markets. By creating a more inclusive regulatory framework, the SEBI has laid the foundation of sustainable long-term growth in real estate and infrastructure investments.
Parag Bhide is a partner, and Mitali Kshatriya and Pranav Sharma are associates with Bharucha & Partners
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