SEBI proposes to allow mutual funds to invest more in REITs and InvITs; know the current limits

The Securities and Exchange Board of India (SEBI) recently released a consultation paper on investment by mutual funds in Real Estate Investment Trusts (REITs) and Infrastructure Trusts (InvITs). The paper has proposed to increase the current limits on investments by mutual funds into REITs and InvITs.

Currently, a mutual fund scheme can invest in REITs and InvITs as per the following conditions:

First, a mutual fund scheme cannot invest more than 10% of its NAV in units of REIT and InvIT, subject to maximum of 5% of its NAV in units of REIT and InvIT issued by a single issuer. This limit is, however, not applicable to index funds or sector or industry-specific schemes about REIT and InvIT.

Second, no mutual fund under all its schemes can own more than 10% of units issued by a single issuer.

What has SEBI proposed?

Source: SEBI

The capital markets regulator has proposed that a mutual fund scheme may invest up to 10% of its NAV in a single issuer of REITs and InvITs.

"As current single issuer and overall limits of 5% and 10% respectively in REITs and InvITs restricts Mutual Funds desirous of taking exposure in REITs and InvITs as asset class, the single issuer limits may be revised similar to limits applicable to investments in equity/ debt instruments, i.e. 10% of NAV of fund," SEBI proposed in the consultation paper dated April 17, 2025.

Further, equity and hybrid mutual funds up to 20% exposure in REITs and InvITs under all their schemes.

"With regard to current overall 10% exposure limit for REITs and InvITs in funds NAV, the same may be revised to 20% for Equity and Hybrid Schemes. However, for Debt Schemes, the same may be kept limited to 10%, considering REITs and InvITs being relatively riskier than debt instruments and perpetual in nature," SEBI said.

The consultation paper is open for public comments till May 11, 2025.