SEBI Eyes Major Shift: REITs and InvITs May Soon Invest in Third-Party Projects
SEBI is considering a move to let REITs and InvITs invest in third-party projects to boost supply and investment opportunities in India.
In a move that could significantly reshape the landscape of real estate and infrastructure financing in India, the Securities and Exchange Board of India (SEBI) is exploring a proposal to allow Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) to invest in third-party projects. This potential policy shift aims to tackle supply constraints and broaden the horizon of investment opportunities within the sector.
The announcement was made by Maninder Cheema, Executive Director of SEBI, during the third edition of the FICCI Real Estate Investment Summit held in Mumbai on Thursday. He highlighted a critical bottleneck in the current system: the reliance on developer-sponsors.
Breaking the Sponsor Bottleneck
Currently, assets typically flow into REITs from a sponsor, who is generally a developer. However, Cheema pointed out that this model often leads to a limited pipeline of available projects for transfer to these investment trusts.
"Normally, assets come into REITs from a sponsor who is usually a developer, and the pipeline of projects may be limited," Cheema explained. "They are open to allowing REITs and InvITs to invest into third-party projects subject to certain conditions."
By opening the doors to third-party projects, SEBI intends to ensure a steadier and more diverse flow of assets, reducing the dependency on a few large developers and allowing trusts to pick the best available opportunities in the market.
Demand is High, Imagination is Lacking
Addressing the current state of the industry, the SEBI Executive Director emphasized that the primary hurdle is not a lack of appetite from investors, but rather a need for more creative investment structures.
According to Cheema, the demand for real estate investments is robust. He suggested that the industry needs to exercise more "imagination" to develop structures that can unlock new opportunities and generate sustainable yields in areas where demand is already proven.
The Scale of Growth: REITs and InvITs by the Numbers
The current scale of these investment vehicles underscores why SEBI is looking to expand their capabilities. The growth figures shared by Cheema paint a picture of a rapidly maturing market:
- REIT Assets: These trusts now hold assets valued at over Rs 3 lakh crore, encompassing more than 214 million square feet of Grade A office space.
- REIT Payouts: Investors received distributions totaling Rs 3,000 crore in the first quarter of the year.
- InvIT Reach: Infrastructure Investment Trusts have expanded their reach to 6.5 lakh unit-holders, distributing Rs 5,900 crore in the previous quarter.
- Total AUM: The combined Assets Under Management (AUM) for both REITs and InvITs stands at a massive Rs 10.5 lakh crore.
The Role of Foreign Capital and Future Goals
Foreign investors have been a cornerstone of this growth. Cheema revealed that foreign capital currently accounts for 30 per cent to 40 per cent of the combined AUM of these trusts.
While international interest remains strong, SEBI is now looking toward the domestic front to ensure long-term stability. A key priority moving forward will be to attract greater participation from Indian domestic insurance companies and pension funds. These institutions are seen as ideal sources of long-term capital, which is essential for the enduring nature of real estate and infrastructure projects.