REITs in India: The SEBI 2026 Reforms and the Path to a Mature Listed Real Estate Market

India's Real Estate Investment Trust ("REIT") market has reached an inflection point. SEBI's 213th Board Meeting on 23 March 2026 approved a package of amendments to the SEBI (Real Estate Investment Trusts) Regulations, 2014 (the "REIT Regulations"), formalised through the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2026 notified on 18 April 2026.¹ These reforms – described by SEBI as an "ease of doing business" initiative – address operational constraints that market participants had been raising with SEBI's Hybrid Securities Advisory Committee ("HySAC") for several years.

At the time of the reforms, five REITs were listed on Indian stock exchanges, with cumulative assets under management across REITs and InvITs of approximately Rs. 9.5 lakh crores as at 28 February 2026.² This is a market that has come a long way since the first Indian REIT listing in 2019, but it remains small relative to its potential. The 2026 reforms are specifically targeted at removing the structural impediments that have constrained its growth.

Background: The Indian REIT Structure

A REIT established under the REIT Regulations is a trust constituted under the Indian Trusts Act, 1882, with a trustee, a manager, and a sponsor. The REIT holds its real estate assets primarily through special purpose vehicles ("SPVs"), which are companies or limited liability partnerships that directly own the underlying properties.³ The REIT raises capital through the public offer of units listed on a recognised stock exchange.

The Indian REIT framework has been closely modelled on international antecedents – particularly the Singapore REIT structure and the REIT frameworks of the United States and Australia – but has been adapted to India's FDI policy architecture and the treatment of real estate assets under Indian company and tax law. The requirement that assets be held through SPVs (rather than directly by the REIT trust) reflects the practical reality that direct property ownership by a trust has created tax and title challenges in India that SPV ownership avoids.

The 2026 SEBI REIT Amendments: Key Changes

Liquidity Management Reforms

The 2026 amendments introduce a more flexible liquidity management framework for REITs, permitting the use of a broader range of instruments for short-term cash management. Under the existing framework, REITs were constrained in their ability to deploy surplus cash between distribution periods, limiting the yield efficiency of the vehicle. The amendments permit REITs to invest surplus cash in a defined category of liquid instruments – including treasury bills, commercial paper issued by entities rated above a prescribed threshold, and overnight index swap positions – subject to internal risk management policies approved by the board of the manager.

This reform is consistent with the approach taken by mature REIT markets. The Singapore REIT regime, governed by the Code on Collective Investment Schemes administered by the Monetary Authority of Singapore, permits REITs to maintain working capital reserves in a range of short-duration instruments without triggering a re-characterisation of the trust's income profile.⁴ The relaxation reduces the cash drag inherent in the existing Indian framework.

Capital Structuring Flexibility

The amendments also address the leverage framework applicable to Indian REITs. REIT Regulations regulation 20 previously imposed a 49% leverage cap (as a percentage of the value of REIT assets), with a sub-limit for aggregate borrowings at the SPV level. The 2026 amendments retain the headline cap but introduce a more granular framework for the treatment of borrowings at different levels of the REIT structure – trust level, holding company level, and SPV level – allowing managers to optimise their capital structures more precisely.

Importantly, the amendments introduce modified treatment for certain categories of refinancing transactions. Where a REIT refinances existing SPV-level debt with debt raised at the trust level, the regulatory treatment of the transaction is now clarified to ensure that the refinancing does not trigger inadvertent breaches of the leverage limits during the transition period. This addresses a practical mechanical issue that had made certain refinancing transactions operationally complex.

Asset Lifecycle and Acquisition/Disposal Framework

The amendments introduce a more nuanced regulatory framework for the treatment of under-construction assets. Under the 2024 regime, REIT regulations imposed restrictions on the proportion of under-construction assets that a listed REIT could hold, reflecting the policy concern that listed REITs should primarily be vehicles for income-generating property rather than development risk. The 2026 amendments relax the under-construction asset limit in defined circumstances – specifically where the REIT has received binding pre-commitments from anchor tenants covering a specified percentage of the gross leasable area of the relevant property, providing a commercially driven substitute for the blanket prohibition.

This reform is commercially significant. India's Grade A commercial real estate market is characterised by pre-lease transactions – where institutional occupiers commit to spaces under construction well before practical completion – and the previous restrictions made it difficult for REIT managers to use the REIT vehicle as the primary acquisition structure for these assets.

The Jan Vishwas Act 2026 and RERA: An Adjacent Development

The REIT reforms must be read alongside the amendments to the Real Estate (Regulation and Development) Act, 2016 ("RERA") introduced by the Jan Vishwas (Amendment of Provisions) Act, 2026, passed by both Houses of Parliament on 2 April 2026 and brought into force on 7 May 2026.⁵ The Jan Vishwas amendments remove the criminal imprisonment provisions for certain RERA offences – replacing them with calibrated monetary penalties – as part of the government's broader "trust-based governance" and ease-of-living agenda.

For REIT managers, the Jan Vishwas amendments are relevant primarily at the SPV level, where the underlying properties must comply with RERA's registration, disclosure, and escrow requirements. The replacement of imprisonment provisions with monetary penalties reduces the regulatory risk profile of RERA non-compliance for individual officers of the SPV, without altering the fundamental compliance obligations. REIT managers should review their RERA compliance frameworks at the SPV level to ensure that existing frameworks remain adequate under the amended penalty structure.

FDI in REITs: The Foreign Investment Architecture

India's REITs may receive foreign investment from non-resident investors, including through the FPI route (for secondary market acquisitions of listed REIT units) and the FDI route (for investments by way of subscription to units in a pre-IPO or follow-on offering). The FDI entry into a REIT is governed by the NDI Rules and the RBI's FEMA regulations, with REIT investments qualifying for the automatic route at 100% ownership subject to a three-year lock-in on each tranche of investment.⁶

This lock-in requirement – unchanged by the 2026 amendments – requires careful structuring for international investors who combine REIT unit holdings with FPI-route investments in listed REIT units. The two categories of holdings are maintained separately for FEMA compliance purposes, and transfers between them require prior regulatory approvals that can be time-consuming in practice.

Foreign institutional investors who have historically accessed Indian real estate indirectly – through offshore fund vehicles investing into real estate operating companies – are increasingly re-evaluating whether the listed REIT structure offers a more liquid and regulatory-efficient exposure to Grade A Indian commercial real estate. The depth of the listed REIT market, at present, remains limited relative to the equivalent markets in Singapore, Australia, and the United States, but the 2026 reforms are intended to improve liquidity and structural flexibility in a manner that should attract additional international capital.

Comparative Landscape: Indian REITs in a Global Context

The global REIT market is approximately USD 3 trillion in total market capitalisation, with the United States, Japan, Australia, and Singapore accounting for the majority of this figure.⁷ India's REIT market, while small in global terms, benefits from structural tailwinds that other developed REIT markets do not: a strongly growing Grade A commercial real estate market driven by the expansion of global capability centres, data centres, and logistics infrastructure; demographic growth supporting residential demand; and a macro-environment characterised by attractive yield spreads relative to sovereign bonds.

The US REIT framework – governed by the Internal Revenue Code sections 856-859 and regulated at the entity level by state corporate law – distributes at least 90% of taxable income and achieves this through a pass-through structure that avoids double taxation at the entity level.⁸ India's REIT framework achieves comparable treatment through the pass-through mechanism under Section 115UA of the Income Tax Act, 1961, which ensures that income distributed to unit holders is taxed in the hands of the unit holder rather than at the trust level, provided that the distribution is made from cash flows consistent with the REIT's prescribed distribution obligations.

Practical Implications for Real Estate Investors and Developers

For real estate investors and developers considering the REIT route in 2026, the following considerations are particularly relevant:

• Asset packaging: The selection of assets to be transferred to the REIT structure – the REIT's initial portfolio – determines the quality of the yield profile that the REIT will offer to public market investors. Assets with stable, long-dated institutional tenant leases, triple-net lease structures, and low capital expenditure requirements are the most attractive; assets with significant vacancy, near-term lease expiry concentration, or deferred capex are likely to price poorly.
• Sponsor lock-in: The REIT Regulations require the sponsor to maintain a specified minimum holding of REIT units for a defined lock-in period post-IPO. Sponsors should plan their capital recycling strategy within the constraints of the regulatory lock-in, particularly where the REIT listing is intended partly as a monetisation mechanism for the original real estate development business.
• Manager governance: The REIT manager is a SEBI-registered entity that bears day-to-day management responsibility for the REIT. The governance relationship between the manager, the trustee, and the unit holders – including the role of the investment committee and the approval thresholds for related party transactions – requires careful documentation in the trust deed and the investment management agreement.

Conclusion

The 2026 SEBI REIT amendments represent a considered and commercially informed set of reforms that address real operational constraints in the market. The measures on liquidity management, capital structuring flexibility, and under-construction asset treatment cumulatively improve the attractiveness of the Indian REIT structure for both domestic and international institutional investors. The Indian REIT market is still in an early growth phase relative to its potential, but the regulatory direction of travel is clearly positive.

Endnotes

¹ SEBI (Real Estate Investment Trusts) (Amendment) Regulations 2026 (Securities and Exchange Board of India, 18 April 2026).

² SEBI, 'Measures towards Ease of Doing Business for Infrastructure Investment Trusts and Real Estate Investment Trusts' (SEBI Board Memorandum, 23 March 2026).

³ SEBI (Real Estate Investment Trusts) Regulations 2014, reg 17.

⁴ Monetary Authority of Singapore, Code on Collective Investment Schemes (MAS, July 2025) ch 4.

⁵ Jan Vishwas (Amendment of Provisions) Act 2026 (passed by both Houses of Parliament, 2 April 2026; brought into force, 7 May 2026).

⁶ Foreign Exchange Management (Non-Debt Instruments) Rules 2019, Sch 1.

⁷ EPRA, Global REIT Survey 2025 (European Public Real Estate Association, 2025).

⁸ Internal Revenue Code (USA) ss 856-859.