SEBI to reclassify MF, SIF investments in REITs as equity from 2026

SEBI will reclassify investments in Real Estate Investment Trusts (REITs) by Mutual Funds and SIFs as equity-related instruments from Jan 1, 2026. The move aims to enhance participation, while existing holdings will be grandfathered.

Starting January 1, 2026, any investment made by Mutual Funds (MFs) and Specialised Investment Funds (SIFs) in Real Estate Investment trusts (REITs) will be considered as an investment in equity-related instruments, Securities and Exchange Board of India (SEBI) said in a statement.

With a view to facilitating enhanced participation by MFs and SIFs in REITs, SEBI had made amendments to the SEBI (Mutual Funds) Regulations, 1996, to reclassify REITs as equity-related instruments.

Effective Date and Index Inclusion

"With effect from January 01, 2026, any investment made by Mutual Funds and SIFs in REITs shall be considered as an investment in equity-related instruments," the SEBI circular dated November 28 read.

Any inclusion of REITs in the equity indices shall be carried out only after a period of 6 months, i.e., July 1, 2026, SEBI said.

Status of InvITs

InvITs shall continue to be classified as hybrid instruments for investments by Mutual Funds and SIFs, SEBI has asserted.

Provisions for Existing Investments

Existing investment in REITs held by debt schemes of Mutual Funds and investment strategies of SIFs as on December 31, 2025, shall be "grandfathered".

The process of exempting current policies, programs, or perks from new rules or adjustments to the investment/budget is known as grandfathering in investment/budgeting.

However, Asset Management Companies (AMCs) are encouraged to make efforts to divest REITs from their respective portfolios of debt schemes, considering market conditions, liquidity, and investor interest, SEBI said.

Market Development and Investor Protection

The SEBI brought in these changes to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. (ANI)

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