9 months ago
Sebi Reclassifies REITs as Equity Assets
The Securities & Exchange Board of India (Sebi) has decided to reclassify Real Estate Investment Trusts (REITs) as equity-related instruments starting January 1.
This change is expected to give mutual funds more freedom to invest in REITs.
However, experts believe that limited supply and low returns might slow down significant inflows into this asset class.
Madhu Nair, CEO of Union Mutual Fund, mentioned that it will take time for flows to come and that early adopters will likely be hybrid, multi-asset schemes, and SIFs.
Industry experts note that real estate companies have outperformed REITs in recent years, but Abhishek Bisen from Kotak Mahindra AMC is selectively positive about REITs due to their regulatory mechanisms and potential for improved liquidity.
The Nifty Realty index has seen a significant rise, while individual REITs have shown varied performance.
Sebi reclassified REITs as equity-related instruments effective January 1.
Limited supply and low returns may restrict inflows into REITs.
Madhu Nair of Union Mutual Fund expects hybrid and multi-asset schemes to be early adopters.
Real estate companies have outperformed REITs in recent years.
Abhishek Bisen of Kotak Mahindra AMC is selectively positive about REITs due to regulatory mechanisms and potential for improved liquidity.
- Who
- Securities & Exchange Board of India (Sebi)
- What
- Reclassified REITs as equity-related instruments
- Where
- India
- When
- Effective from January 1
- Why
- To enable mutual funds to invest in REITs with more liberty in mandates
Key facts
- Sebi Decision Date
- January 1
- REITs Reclassification
- Equity-related instruments
- Expected Impact on Debt Funds
- Cannot invest in REITs after December 31, 2025
- Index Inclusion Date
- July 1, 2026
- Nifty Realty Performance
- Rose more than 200% in the past five years
- Embassy REIT Performance
- Risen 43.2% since March 2019
- Brookfield India REIT Performance
- Gained 21% since 2021
- Mindspace REIT Performance
- Risen nearly 70% since August 2020
- Nexus Select Trust Performance
- Risen 64% since May 2023
- Knowledge Realty Trust Performance
- Risen 19% since August 2023
Quotes
Madhu Nair
CEO of Union Mutual Fund
“It’ll take time for flows to come as we will have to test the markets, but higher demand will lead to increased volatility and lowering of yields. Having said that, given the asset class’s current properties of lower volatility and fixed income-like predictability, early adopters will be schemes like hybrid, multi assets, and even SIFs.”
financialexpress.com
“We will evaluate it as an independent asset class and expect more products to be developed.”
financialexpress.com
Abhishek Bisen
Head of fixed income at Kotak Mahindra AMC
“Increased institutional participation will deepen the market, improve price discovery, and potentially reduce volatility. Reclassification also creates possibility of inclusion in equity indices which will improve liquidity through passive flows. However, as per the Sebi circular, any index inclusion shall be carried out only after six months i.e, July 1,2026.”
financialexpress.com
“We are selectively positive on REITs as an asset class as these instruments provide investors exposure to real estate without direct ownership and have strong regulatory mechanisms for investor protection.”
financialexpress.com
