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The Securities and Exchange Board of India (SEBI) has proposed increasing the investment limits for mutual funds in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). This move aims to offer more investment options and enhance diversification within mutual fund schemes. SEBI has suggested raising the single issuer limit to 10% of a fund's net asset value (NAV) and increasing the overall exposure limit for equity and hybrid schemes to 20%. However, for debt schemes, the overall limit would remain at 10%. The regulator is seeking public feedback on this proposal until May 11, 2025.
To diversify mutual fund portfolios and provide more investment options, the Securities and Exchange Board of India (SEBI) proposed revising the current investment limits in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). This proposal is expected to broaden the market base for REITs and InvITs, boosting liquidity and capital inflows. Advertisement
At present, mutual funds face investment restrictions in these asset classes, with single issuer limits set at 5% and overall exposure capped at 10%. According to SEBI's recent consultation paper, these limits have been a barrier for funds wishing to increase their exposure to REITs and InvITs. The regulator has suggested that the single issuer limit be increased to 10% of a fund's net asset value (NAV), aligning it with the limits for equity and debt instruments.
For equity and hybrid mutual fund schemes, SEBI proposed an increase in the overall exposure limit from 10% to 20% of the fund's NAV. However, the exposure limit for debt schemes would remain at 10%, given the relatively higher risk and perpetual nature of REITs and InvITs compared to traditional debt instruments.
The proposal also considers the current market conditions, including the number of listed REITs and InvITs, their liquidity, and their growth potential. SEBI has invited public comments on the proposal, with feedback being accepted until May 11, 2025.
SEBI's proposal to increase investment limits in REITs and InvITs seeks to enhance mutual fund portfolios by introducing more flexibility and diversification. If implemented, these changes could open new avenues for mutual funds to capitalize on real estate and infrastructure assets, fostering greater market participation. However, the final impact will depend on the feedback from the public and the regulator's evaluation of market conditions.
Source: PTI
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