The Indian real estate sector is witnessing a pivotal moment. On September 12, 2025, the Securities and Exchange Board of India (SEBI) announced sweeping capital market reforms that reclassified Real Estate Investment Trusts (REITs) as equity instruments—a landmark decision that industry experts are calling transformative for the sector.
The Landmark Decision
In what many are hailing as a “landmark move,” SEBI approved the reclassification of REITs from their previous hybrid status to equity instruments, while Infrastructure Investment Trusts (InvITs) retain their hybrid classification. This strategic shift aligns Indian markets with global practices and is expected to unlock significant value for both investors and the real estate sector.
Why This Classification Matters
Enhanced Market Access and Liquidity
The equity classification opens doors for REITs to be included in major equity indices, dramatically improving their visibility and accessibility to institutional investors. This enhanced market access is expected to boost liquidity significantly, making REIT investments more attractive to a broader investor base.
Broadened Investor Participation
With the equity tag, REITs become eligible for inclusion in equity-focused investment products, including mutual funds and pension funds that have specific equity allocation mandates. This structural change is expected to drive substantial capital inflows into the real estate sector.
Reduced Cost of Capital
The classification is likely to reduce the cost of capital for REIT sponsors and developers, making it more economical to launch new REITs and expand existing portfolios. This cost efficiency translates to better returns for investors and more competitive real estate development.
Industry Response: Unanimous Support
The industry’s response has been overwhelmingly positive. Amit Shetty, CEO of Embassy REIT, called the decision a “landmark move” that will broaden investor participation, enhance liquidity, and strengthen REITs as a mainstream asset class. The Indian REITs Association (IRA) echoed this sentiment, emphasizing how this reform positions REITs as a cornerstone of India’s investment landscape.
Industry experts unanimously agree that this move will:
- Accelerate the development of a robust REIT ecosystem
- Unlock previously constrained liquidity
- Enable deeper market participation
- Strengthen REITs’ position as a mainstream asset class
The Investment Appeal: Strong Performance Metrics
The timing of this classification couldn’t be better. Recent data reveals that Indian REITs are generating average yields of 6-7.5% for unitholders—outperforming many mature markets, including the United States. While equity markets have seen modest returns in 2025, REITs have delivered significant gains, with some yielding 8-16%.
This performance is primarily driven by India’s booming commercial real estate sector, fueled by the expansion of Global Capability Centers (GCCs) and increasing demand for quality commercial spaces.
Market Potential: A Trillion-Dollar Opportunity
The Indian real estate market is projected to reach $1 trillion by 2030, showcasing remarkable resilience and growth potential. With REITs now classified as equity, investors can participate in this growth story more easily and effectively.
Current REITs in India offer:
- Accessibility: Minimum investment starting from ₹10,000-15,000 for one unit
- Professional Management: Experienced management teams handling complex real estate portfolios
- Diversification: Exposure to premium commercial real estate without direct ownership complexities
- Liquidity: Exchange-traded instruments offering better liquidity than direct real estate investment
What This Means for Different Stakeholders
For Individual Investors
- Enhanced Portfolio Options: REITs become a structured, regulated alternative to physical property investment
- Better Goal-Based Planning: Easier integration into long-term investment strategies
- Improved Liquidity: More liquid than direct real estate investments
- Professional Management: Access to professionally managed real estate portfolios
For Institutional Investors
- Regulatory Compliance: Easier inclusion in equity-mandated portfolios
- Index Inclusion: Potential inclusion in major equity indices
- Enhanced Due Diligence: Better regulatory framework and transparency
- Strategic Asset Allocation: Clearer classification for portfolio management
For Real Estate Developers
- Lower Capital Costs: Reduced cost of raising capital through REIT structures
- Market Access: Better access to institutional capital
- Exit Strategy: More attractive exit options for completed projects
- Scale Opportunities: Enhanced ability to scale operations through public markets
For the Broader Economy
- Capital Market Development: Deeper and more liquid capital markets
- Real Estate Sector Growth: Increased capital flow into real estate development
- Economic Multiplier Effect: Enhanced real estate activity driving broader economic growth
- International Alignment: Better alignment with global investment practices
Looking Ahead: Future Implications
This reclassification is expected to trigger several positive developments:
Increased REIT Launches
With enhanced market access and investor demand, more developers and sponsors are likely to launch new REITs, expanding the investible asset base and providing investors with diverse options across different real estate segments.
Market Deepening
The equity classification will likely attract more sophisticated investment strategies, including algorithmic trading and institutional investment programs, leading to a more mature and efficient REIT market.
Innovation in Products
Financial institutions may develop new investment products that leverage the equity classification of REITs, potentially including REIT-focused mutual funds, ETFs, and structured products.
Regulatory Evolution
As the market matures, we can expect further regulatory refinements that enhance investor protection while maintaining market efficiency and growth potential.
The Road Ahead
SEBI’s decision to classify REITs as equity represents more than a regulatory change—it’s a strategic realignment that positions Indian real estate investment trusts for accelerated growth and mainstream adoption. As industry leaders have noted, this reform has the potential to cement REITs as a mainstream asset class in India’s investment ecosystem.
For investors, this development offers an unprecedented opportunity to participate in India’s real estate growth story through a regulated, liquid, and professionally managed investment vehicle. For the real estate sector, it opens new avenues for capital raising and portfolio optimization.
As India’s real estate market marches toward its trillion-dollar milestone, REITs are now better positioned than ever to be significant contributors to this growth, offering investors a compelling blend of steady income, capital appreciation potential, and portfolio diversification.
The reclassification of REITs as equity isn’t just a regulatory update—it’s the foundation for the next chapter of growth in India’s real estate investment landscape. The question isn’t whether this will transform the market, but how quickly investors and industry participants will capitalize on this landmark opportunity.
This regulatory development marks a significant milestone in India’s capital market evolution, promising enhanced opportunities for both investors seeking real estate exposure and developers looking for efficient capital market access.
