India’s infrastructure and real estate sectors are on a continuous growth path. To make investments in these sectors more attractive, SEBI has introduced significant relaxations in the regulations for InvITs and REITs. This move aims to increase operational flexibility and strengthen the ease of doing business. On 23 March 2026, the SEBI Board approved these changes, which are expected to help these trusts deal with practical challenges more effectively.
Let us understand how SEBI’s new regulations will improve the functioning of InvITs and REITs and what they mean for investors.
What’s Happening?
SEBI has made several important amendments to the regulations governing InvITs and REITs. InvITs can now continue to hold investments in Special Purpose Vehicles (SPVs) even after the concession agreement ends. Earlier, this was not possible because, once the concession ended, 90% of the SPV’s assets were required to be in infrastructure projects. This condition was often difficult to meet due to pending claims, litigation, tax assessments, or defect liability periods.
Under the new rules, InvITs will get one year to exit the SPV or acquire a new infrastructure asset. This period will be counted after the resolution of litigation or completion of the defect liability period. The time taken for regulatory approvals has been excluded from this one-year limit. In addition, InvITs will be required to provide better disclosures regarding liabilities and ongoing litigation.
REITs and InvITs can now invest surplus funds in a wider range of liquid mutual fund schemes. Earlier, investments were allowed only in top-rated instruments (Class A-I), where only 9 out of 38 liquid funds qualified. Now, investments can be made in both Class A-I and B-I categories, which include instruments rated AA and above. This is expected to reduce concentration risk.
Increase in Operational Flexibility
SEBI has also introduced new relaxations for privately listed InvITs. They can now invest up to 10% of their asset value in under-construction or pure greenfield projects. Earlier, this relaxation was available only to public InvITs. This change brings parity between public and private InvITs. Public InvITs are required to keep 80% of their assets in completed, revenue-generating projects, while the remaining 20% can be allocated to other opportunities.
In addition, InvITs with net borrowings between 49% and 70% of asset value can now raise fresh debt. This debt can be used for capital expenditure, major maintenance of road projects, and refinancing of existing borrowings. Refinancing will be limited to the principal amount, ensuring that net borrowing levels do not increase. Earlier, such borrowing was permitted only for project acquisition or development. These changes will support funding across the entire life cycle of infrastructure assets.
Expansion of Investment Options
With these steps, InvITs and REITs are likely to gain greater operational flexibility. The broader range of liquid mutual fund options for surplus funds will make diversification easier and help reduce risk. Allowing private InvITs to invest in greenfield projects will also support new infrastructure development.
The relaxation in borrowing norms will enable InvITs to raise funds more efficiently for asset improvement, capacity expansion, and maintenance of road projects. These changes address practical challenges and strengthen the ease of doing business. The decisions, based on the recommendations of Hybrid Securities Advisory Committee (HySAC) , were approved by the Board on 23 March 2026.
What Does This Mean for Investors?
These changes are positive for investors, as InvITs and REITs will now be able to operate with greater flexibility. The ability to hold SPVs for an additional year will help avoid forced sales due to unresolved issues and support value preservation. A wider set of liquid fund options can lead to better risk management and more balanced returns.
Allowing greenfield investments in private InvITs opens up opportunities to participate in new projects, which can support long-term growth. The relaxation in borrowing norms will also make it easier to maintain and upgrade assets, improving the potential for stable cash flows and consistent returns. Overall, these regulatory changes make InvITs and REITs more attractive, especially for investors seeking relatively stable income from infrastructure and real estate.
What’s Next?
Going forward, these changes are likely to strengthen the InvIT and REIT market in India. With increased operational flexibility, more developers and sponsors may use these structures, making funding easier for infrastructure and real estate projects. Higher participation in greenfield projects could also accelerate new development.
SEBI’s steps are expected to improve the ease of doing business and boost investor confidence. Over the long term, this could make infrastructure financing more efficient. However, investors should continue to evaluate these trusts carefully and conduct thorough research before making investment decisions. These reforms are likely to make the Indian market more competitive at a global level.
Disclaimer: This article is for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The companies mentioned are cited as examples within the context of market developments. Investors are advised to conduct their own due diligence and consult their financial advisor before making any investment decisions.
Investments in the securities market are subject to market risks. Read all related documents carefully before investing.
