Equity label for REITs to draw MFs, index investors

MUMBAI: The reclassification of real-estate investment trusts (REITs) as equity will make them eligible for inclusion in benchmark indices, drawing in mutual funds and institutional investors.

Developers stand to benefit from lower financing costs and more diversified funding, while investors can diversify into real estate with opportunity for steady dividends and potential capital appreciation without the illiquidity of property. An REIT is an entity that owns income-generating real estate and lets investors earn returns from rents and dividends without owning property directly.

"The reclassification of REITs as 'equity' for mutual fund investments is also a timely step that will enhance diversification opportunities and support the growth of real estate as an investible asset class," says Venkat N Chalsani, chief executive of MF industry body Amfi. "Taken together, these initiatives will broaden investor participation, strengthen the long-term health of the mutual fund industry, and strike a thoughtful balance between regulatory rigor, investor protection, and ease of doing business."

For REIT managers, the move is equally transformative. "At Embassy REIT, we see this as a catalyst to broaden investor participation, enhance liquidity, enable future index inclusion, and further strengthen REITs as a mainstream investment asset class," says Amit Shetty, its chief executive.

According to a report by Anarock Since the first REIT listing in 2019, the market has grown steadily to about $18 billion in capitalisation as of Aug 2025. With three more listings expected in the next four years, it is projected to cross $25 billion by 2030. Yet that represents just 20% of institutional real estate.