Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), which manage assets of more than ₹9 lakh crore, offer asset monetisation benefits to developers and investors. As the Economic Survey FY26 observes, these instruments have opened up alternative long-term fund raising options to bank credit. But they come with risks and opportunities. There are valid concerns over regulating the management of widely-held pooled funds, even as developers and investors benefit from easy liquidity.
In this fiscal, the stock exchange regulator has reduced minimum asset size and allowed REITs to be treated as equity-related instruments for mutual fund investments. These steps could enhance participation and secondary market liquidity. But the regulator also needs to be mindful of the interests of the investors, while easing the rules. For instance, the proposal to allow private InvITs to invest in greenfield projects may not benefit investors. Infrastructure projects carry higher regulatory and implementation risk. Given the greater uncertainty over the income generated from these projects, publicly listed InvITs are currently allowed to invest 80 per cent of their assets in completed and income generating projects and the remaining in under-construction projects. With publicly listed InvITs being under greater scrutiny and having higher disclosure requirements, they are permitted to invest up to 10 per of their assets in greenfield projects. However, expanding this dispensation to private InvITs may lead to diversion of funds.
Similarly, expanding the scope of using an InvIT’s borrowed funds is not a good idea. Currently, net borrowings that exceed 49 per cent of an InvIT’s assets are allowed only for fresh acquisition or for development of infrastructure projects, thereby leading to improvement in the revenue generated by the InvIT. The suggestion that this higher borrowing be used to refinance loans and be used for maintenance can lead to excessive leverage and interest cost.
The proposal to allow REITs and InvITs to raise funds from mutual fund schemes categorised as medium risk by SEBI can actually be considered. Given that there are very few schemes in the lowest risk category, expanding the investment universe may not be a bad idea. Similarly, InvITs can be allowed to continue the investment in special purpose vehicles, even after the infrastructure project held by the SPV has been handed over to the government. It is difficult to wind up a SPV immediately after the end of the concessional period (when the income from the project can be enjoyed by the InvIT) in the event of litigations, need to complete tax assessments and fulfil other liabilities. But there should be specific time-line for winding up the SPV or acquiring other projects. All necessary disclosures must be made to regulators and investors. Opening up fund raising options for REITs and InvITs must be accompanied by competent oversight.
Published on February 15, 2026