JSA Prism | Finance | August 2026

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From access to agility: The August 2026 reform agenda for Real Estate Investment Trusts and Infrastructure Investment Trusts

On August 4, 2026, and August 6, 2026, the Securities and Exchange Board of India (“SEBI”) released two consultation papers concerning Real Estate Investment Trusts (“REITs”) and Infrastructure Investment Trusts (“InvITs”): (a) a consultation paper proposing a framework for Depository Receipts (“DRs”) against REIT and publicly listed InvIT units (the “DR Paper”); and (b) a consultation paper proposing measures towards Ease of Doing Business (“EoDB”) for REITs and InvITs (the “EoDB Paper”). Read together, these papers signal a regulatory approach that treats REITs and InvITs, an asset class introduced barely over a decade ago, as sufficiently mature for calibrated flexibility rather than heightened caution.

Widening the door: depository reports for InvITs and REITs

REITs and InvITs, structured as trusts registered under SEBI (REITs) Regulations, 2014 (“REITs Regulations”) and SEBI (InvITs) Regulations, 2014 (“InvIT Regulations”), are already open to overseas investors. The Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (“NDI Rules”) permit a person resident outside India to invest directly in their units, which are treated as ‘Pooled Investment Vehicles’ for this purpose.

What the DR Paper proposes is not new permission but a new route to raise funds or increase liquidity. A DR is a foreign currency-denominated instrument, issued by a foreign depository against units deposited with a domestic custodian, that can be listed and traded on an overseas exchange, sparing an investor the need to register as a Foreign Portfolio Investor (“FPI”) or hold rupee-denominated units directly.

SEBI notes that the DR Scheme, 2014 and the NDI Rules already treat REIT and InvIT units as DR-eligible, but no enabling clause exists under the REIT Regulations or InvIT Regulations. It proposes closing that gap by inserting Regulation 14(12A) into the REIT Regulations and Regulation 14(4)(ma) into the InvIT Regulations, confined to REITs and publicly listed InvITs. Privately listed InvITs are excluded because their high trading lot and restricted investor base cannot realistically be enforced once units are represented by DRs commence trading offshore.

The detailed operational framework is expected to be prescribed by circular, broadly aligned with SEBI’s existing framework for equity DRs, thereby extending a tested regime to a trust structure rather than creating a separate, less stringent regime. If adopted, the proposal would represent less a substantive expansion of the investor base and more a reduction in the regulatory and operational friction associated with cross-border investment. It is intended to facilitate greater international investor participation and diversifying the funding sources available to REITs and publicly listed InvITs, which have, to date, relied primarily on the FPI route for foreign investment.

Smoothening the machinery: five measures for EoDB

The EoDB Paper is narrower in ambition but broader in reach, touching 5 (five) points of friction identified by the Indian REITs Association (“IRA”), the Bharat InvITs Association (“BIA”) and SEBI’s Hybrid Securities Advisory Committee (“HYSAC”):

• the first relates to capital deployment and expansion of the asset pipeline. At present, REITs and InvITs are not permitted to invest in special purpose vehicles unless they hold a controlling interest, majority ownership and board representation. This restricts their ability to participate in under-construction projects, even where such investments fall within the existing investment limits.
  Industry associations have highlighted that the existing framework may restrict access to structured, minority-stake capital investment during the development phase of the projects. SEBI’s proposal seeks to permit such non-controlling investments, subject to specified conditions, including that the investee entity is a third-party entity with no shareholding by the sponsor or sponsor-group, derives at least 80–90 % of its assets from real estate or infrastructure, and is subject to a binding ‘glide path’ and shareholder agreement for eventual SPV-qualifying control. The proposed framework could enable REITs and InvITs to participate in projects at an earlier stage and potentially broaden the pool of capital available to developers.
  The proposed flexibility remains subject to a structured pathway towards regulatory compliance. Any non-controlling investment would be required to follow a defined mechanism for eventual transition to the controlling-interest model prescribed under the existing framework and would, in all cases, remain subject to approval by the board of directors of the investment manager;

• the second relates to unitholder voting thresholds. Certain matters including a change in sponsor, borrowings above 49% or conversion of a private InvIT into a public InvIT, currently require approval from 75% of the unitholders by value of all outstanding units. Industry associations have noted that this threshold maybe difficult to achieve, particularly where a significant proportion of unitholders do not participate in voting. SEBI proposes to recalibrate the threshold to 75% of the votes actually cast, thereby aligning the voting framework for REITs and InvITs more closely with the approach under the Companies Act, 2013. The proposed change is intended to facilitate more effective decision-making while retaining meaningful unitholder participation, particularly given the availability of remote electronic voting mechanisms;
• the third relates to the exit-offer regime triggered by a change in sponsor. The current definition of ‘dissenting unitholders’, would be narrowed to include only those unitholders who have voted against the relevant proposal, excluding unitholders who have abstained or not participated in the voting process. Tendered units would need to be accepted in full rather than being scaled back proportionately to preserve minimum public unitholding, with a one-year window period to remedy any resulting shortfall. This approach is aligned with the timelines under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. Where a REIT or InvIT has multiple sponsors, either the outgoing or any continuing sponsor may discharge the exit obligation, thereby addressing an ambiguity under the extant regulations.
  Though this opens the gateway to an interesting commercial tussle between the existing and incoming sponsor as to who should bear this cost;

• fourth, the proposed amendments seek to address a definitional gap relating to ‘real estate. Common infrastructure, renewable energy and utility assets that are not co-located with a REIT’s properties, outside the definition of “real estate” would be corrected, removing a barrier to REIT-led sustainability investment; and
• fifth, the proposed amendments seek to reduce the cooling-off period governing offer-for-sale transactions in privately listed InvIT units from the existing 12 (twelve) week for illiquid instruments, to 8 (eight) weeks. This recognises the structurally thin liquidity associated with the prescribed trading lot of INR 25,00,000 (Indian Rupees twenty-five lakh).

The regulatory logic

Though different in the subject matter, the 2 (two) papers share a common method. Neither proposes a wholesale rewrite; each respond to a specific, evidenced friction point raised through SEBI’s consultative process rather than a general loosening of the regime. Each pairs the relief granted with a corresponding condition:

• DR issuance is confined to REITs and publicly listed InvITs and remains expressly subject to the underlying regulations;
• minority investment requires a binding glide path, sponsor-group exclusion and manager-board approval, to avoid the investment trusts becoming trading or financing or speculative entities;
• the narrower dissenting-unitholder definition comes with a mandatory disclaimer to unitholders about who qualifies for an exit, and a full-acceptance rule is offset by a defined cure period for any resulting shortfall in public unitholding.

The proposed changes indicate a shift in SEBI’s regulatory approach rather than a dilution of oversight. The framework moves away from broad structural restrictions toward conditions attached to specific transactions, supported by enhanced disclosure requirements and board-level accountability.

Conclusion

Taken together, the 2 (two) papers touch nearly every participant in the REIT and InvIT ecosystem. Sponsors gain more room to structure capital, exits and, potentially, an overseas fundraising avenue. The unitholders get a voting and exit regime with a narrower, more workable trigger. The overseas institutional investors gain a more familiar, exchange-traded route to Indian REIT and InvIT exposure. Comments on the DR Paper are due by August 25, 2026, and on the EoDB Paper by August 27, 2026. Whether or not each measure is adopted as drafted, the 2 (two) papers together describe a regulator treating REITs and InvITs as a mature enough asset class to warrant calibration rather than caution, opening access on one front while easing the day-to-day mechanics on the other.

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