SEBI's Strategic Shift Paves Way For Wider Investor Access To Drive REIT And InvIT Growth

In a strategic move set to transform the real estate and infrastructure investment landscape in India, the Securities and Exchange Board of India (SEBI) released a consultation paper on August 1, 2025¹, suggesting major amendments to the definition of "strategic investor" within the REIT (Real Estate Investment Trusts) and InvIT (Infrastructure Investment Trusts) regulations.This initiative arises during a period of significant growth in India's real estate and infrastructure sectors, fuelled by urbanisation, government initiatives, and a rising demand for reliable, yield-generating assets.The proposal seeks to open new channels for capital investment, enhancing the accessibility and attractiveness of these investment vehicles to a wider range of sophisticated participants.As the market progresses, this may lead to improved liquidity, diversified portfolios, and greater returns for those aiming to seize long-term, income-oriented opportunities.

Objective

The main objective of SEBI's consultation paper is to broaden the range of eligible strategic investors for REITs and InvITs, thus enhancing access to capital and fostering a more business-friendly environment.By aligning the definition of strategic investors with the broader framework of Qualified Institutional Buyers (QIBs) as outlined in the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations), the regulator aims to overcome existing limitations that hinder participation from vital institutional players.This harmonisation is anticipated to boost confidence in public offerings, demonstrate robust support for these trusts, and ultimately contribute to national growth through increased investment in real estate and infrastructure initiatives.For market participants, this means opportunities for early engagement in high-potential offerings, where strategic commitments can result in advantageous allocations and long-term value generation.

Current Framework under the definition

Under the current SEBI (REIT) Regulations, 2014², and SEBI (InvIT) Regulations, 2014, the definition of a strategic investor is quite narrow, covering only certain entities such as infrastructure finance companies that are registered with the Reserve Bank of India (RBI) as Non-Banking Financial Companies (NBFCs), scheduled commercial banks, international multilateral financial institutions, systemically significant NBFCs recognised by the RBI, and foreign portfolio investors (FPIs).These investors are required to committed to subscribe, either collectively or individually, to a minimum of 5% of the total offer size (or as determined by SEBI), while adhering to the regulations set out in the Foreign Exchange Management Act, 1999, along with related guidelines.

Strategic investors are granted units prior to the public offering being launched, entering into legally binding subscription agreements with the REIT manager or InvIT investment manager.They are bound by a lock-in period of 180 days starting from the listing date, which is intended to showcase commitment and enhance market confidence.Nevertheless, this narrow definition excludes numerous institutional players whose investment objectives align seamlessly with the stable, income-producing characteristics of REITs and InvITs, assets that provide consistent cash flows from completed, income-generating properties or infrastructure.Consequently, trusts frequently forfeit potential capital from these avenues during the strategic phase, thereby constraining the overall success and variety of their offerings.

Proposed Amendments

SEBI's initiative aims to revise the definition to include a broader range of entities, particularly those recognised as QIBs under the ICDR Regulations.This would encompass mutual funds, venture capital funds, alternative investment funds, insurance companies, provident and pension funds (with a minimum corpus of ₹25 crore), public financial institutions, state industrial development corporations, and more.For FPIs, the revision specifies that only those recognised as QIBs excluding individuals, corporate entities, or family offices would qualify, ensuring the emphasis remains on institutional sophistication.The fundamental requirements stay the same: a minimum 5% investment in the offer size, binding agreements, and a lock-in period.Nevertheless, by including QIBs, SEBI intends to eliminate obstacles that currently hinder trusts from accessing a more extensive capital pool.This modification would allow REITs and InvITs to attract commitments from entities experienced in long-term, yield-focused investments, thereby enhancing the credibility and appeal of issuances.For participants in these markets, the proposal creates opportunities to engage in pre-issue allocations, potentially securing stakes in trusts supported by high-quality assets such as commercial real estate or critical infrastructure.

Window for Public opinion

SEBI has sought feedback, opinions, and suggestions from the public regarding these proposals, highlighting its keenness to inclusive policymaking.Contributions can be submitted through the online form available on SEBI's website or by emailing the designated officials, with the deadline set for August 22, 2025.This period offers market participants a chance to share their insights, helping to ensure that the final regulations take into account practical considerations and foster a dynamic ecosystem.

Implications and Comments

The suggested amendments possess significant implications that have the potential to transform the REIT and InvIT markets.By broadening the base of strategic investors, SEBI envisions a surge in institutional capital, thereby expanding the funding pool for essential sectors such as real estate and infrastructure which are critical components for India's economic advancement.This development could facilitate more successful public offerings, with early commitments from a various entities indicating stability and attracting additional interest.

Increased liquidity and enhanced market depth are crucial benefits, as wider participation may mitigate volatility and enhance price discovery.For trusts, the capacity to obtain pre-issue allocations from a broader pool simplifies fundraising efforts, aligning India's framework with global best practices where pension funds, insurance companies, and similar entities actively support such investments.This diversification not only instils confidence but also aids in long-term capital formation, allowing trusts to invest in high-quality assets that yield consistent returns.

Furthermore, the modifications encourage a more business-friendly atmosphere by eliminating exclusionary barriers, enabling trusts to capitalise on the expertise and resources of QIB-aligned entities.In a post-pandemic economy that prioritises infrastructure expenditure, this could fasten project development, providing attractive, inflation-resistant returns amidst a growing interest in alternative assets.Overall, the amendments position REITs and InvITs as increasingly appealing avenues for building resilient portfolios, with the potential for enhanced distributions and capital appreciation.

In conclusion, SEBI's consultation paper signifies a progressive move toward a more inclusive and vibrant investment landscape.As the deadline for feedback nears, the finalisation of these amendments could represent a crucial juncture, fostering greater participation in India's expanding REIT and InvIT arena.For those seeking opportunities in stable, growth-focused sectors, this evolution offers improved access, strategic benefits, and the promise of favourable outcomes in an ever-more sophisticated market.

Footnotes

1 SEBI | Consultation Paper on Amendment to the definition of Strategic Investor for REITs and InvITs