9 ways SEBI’s reclassification of REITs as equity will impact your portfolio & what happens next
Dec 15, 2025
SEBI’s big move — REITs are now equity
SEBI's November 2025 circular reclassifies REITs as equity-related instruments from January 1, 2026. This change will reshape India's real estate investment market in a big way. It opens doors for new capital to flow into property investments. Investors can now expect easier access and more opportunities in this growing sector.
What the new rule really means
⦁ REITs = Equity from Jan 1, 2026
⦁ InvITs = Still Hybrid
New REIT investments by mutual funds & SIFs will count as equity exposure, changing how portfolios are built and regulated.
Grandfathering protects existing investors
Debt mutual funds holding REITs as of December 31, 2025, can continue to keep them without any rush to sell. SEBI has allowed fund houses to exit these holdings gradually, depending on market conditions. This careful approach prevents sudden price swings and panic selling by investors. It ensures a smooth transition for everyone involved.
Visibility boost — indices to include REITs after July 2026
AMFI will now classify REITs separately in its official lists, making them easier for investors to track and understand. Equity indices will include REITs only after July 1, 2026. This delayed inclusion gives markets enough time to adjust. It also helps avoid sudden changes in index weights that could affect investors.
Why this reclassification is a game-changer
⦁ More capital inflows from equity funds
⦁ Higher liquidity, smoother price discovery
⦁ A psychological shift: REITs viewed as growth assets, not just yield vehicles
⦁ Paves the way for deeper, long-term participation from institutional and retail investors.
Who gains the most?
⦁ Retail investors: Easier, indirect access through equity MFs
⦁ Mutual funds & SIFs : Fewer allocation constraints
⦁ Developers : Stronger fundraising prospects
Office-heavy cities like Gurugram, Mumbai, Bengaluru gain attention as REIT portfolios grow.
REIT performance so far — a solid track record
Since 2019, Indian REITs have:
⦁ Delivered high occupancy
⦁ Offered steady rental yields
⦁ Distributed 90%+ of income
Institutional participation has dominated till now — SEBI aims to change that.
What stays the same
⦁ Taxation unchanged — REIT income continues under existing rules
⦁ InvITs remain hybrid instruments
⦁ No forced changes to AMC schemes — just addendums
⦁ This is a structural evolution, not a rushed overhaul.
What happens next — and why it matters
2026 brings:
⦁ New AMC allocations
⦁ Updated AMFI classifications
⦁ Index providers evaluating REIT inclusion
Result?
More liquidity, broader participation, better price discovery — and a stronger bridge between real estate and India’s equity markets.
[The Economic Times]
