SEBI's Historic Move: REITs Now Classified as Equity Instruments from January 2026

The Securities and Exchange Board of India (SEBI) has announced a landmark regulatory change that is expected to reshape the landscape of real estate investing in the country. The market regulator has officially reclassified Real Estate Investment Trusts (REITs) as equity-related instruments, with the new framework scheduled to take effect from January 1, 2026, for investments made by mutual funds and Specialised Investment Funds (SIFs).

Under this revised classification, any investment in REITs by mutual funds or SIFs will henceforth be categorised as equity exposure, departing from the earlier "hybrid" classification that had been in place. It is noteworthy that Infrastructure Investment Trusts (InvITs) will continue to be treated as hybrid instruments under the existing regulatory framework.

Implications for Markets, Funds, and Investors

The regulatory overhaul carries significant implications for the investment ecosystem. Mutual funds will now be permitted to allocate a portion of their equity exposure to REITs, effectively removing the structural restrictions that had previously limited fund-level participation in this asset class. Industry experts believe this development could prove transformative for investors exploring mutual funds versus property investment options.

Market analysts anticipate that this move will substantially boost liquidity in listed REITs while attracting institutional investors who had previously stayed away from hybrid instruments. The REIT sector in India has grown 13% in FY25, and this reclassification could accelerate that trajectory further.

Reports indicate that the listing performance of existing REITs surged immediately following the announcement of the reform, reflecting heightened investor optimism regarding the sector's future prospects. Additionally, the reclassification may pave the way for REITs to be included in equity indices, which would further enhance visibility and attract passive investment flows into these instruments.

Strategic Impact: Broader Real Estate Access and Capital Market Depth

With this regulatory change, REITs now stand on nearly equivalent footing with shares of listed companies, offering investors a regulated and transparent route to real estate assets through equity-style exposure. For those seeking to understand why smart investors choose REITs, this development adds another compelling reason to consider these instruments.

The reform is expected to help bridge the gap between real estate and capital markets, facilitating a more mature and accessible real estate investment ecosystem in India. Industry observers note that India is the fastest-growing REIT market in Asia-Pacific, and this policy change further strengthens that position.

For developers and real estate firms with REIT listings, the reclassification could translate into improved valuations, deeper market participation, and easier fundraising through public markets. As top real estate developers in India continue to list their commercial portfolios, the enhanced equity status of REITs will likely encourage more players to explore this route for capital mobilisation.

What Retail Investors Should Consider

For retail investors, this regulatory shift opens new avenues for portfolio diversification. Those who have been evaluating whether India's REITs have delivered returns may find the equity reclassification particularly relevant, as it could lead to increased institutional buying and potentially better price discovery.

The development also holds significance for investors comparing property versus stocks in India, as REITs now offer a middle ground with the regulatory treatment of equities combined with exposure to income-generating real estate assets.

Meanwhile, top REITs in India for passive income including Embassy, Brookfield, and Mindspace are expected to benefit from increased fund flows once the new classification comes into effect. The Brookfield India REIT's recent expansion demonstrates the growing appetite for such instruments in the Indian market.

Disclaimer: This article is intended for informational purposes only and should not be construed as investment advice. Readers are advised to consult qualified financial advisors before making any investment decisions. The information provided herein is based on publicly available sources and reports, and while every effort has been made to ensure accuracy, Ghar.tv does not guarantee the completeness or reliability of the information. Investment in REITs and other securities involves market risks, and past performance is not indicative of future results.