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REIT and InvIT Mutual Fund Cap: SEBI Plan to Double Limit

1 May 20251 min read
BANKING & FINANCEREIT and InvITMutual Fund Cap:SEBI Plan toDouble Limit1 May 2025safalsetu.com

Why in the news

SEBI floated a plan in May 2025 to double the mutual fund ceiling for REITs and InvITs. Observers urged caution.

Key facts

  • Cap: 10% to 20%, to draw patient money into property and infrastructure.
  • Exposure: under 0.3% of AUM.
  • Universe: four REITs, 18 InvITs (eight actively traded); Embassy REIT turns over about ₹41 crore daily.
  • Payout: 90% of income must be distributed.

Concerns

  • Liquidity traps, NAV distortion and hard exits in thin markets.
  • Stale disclosures can make NAVs inaccurate.
  • Neither pure equity nor debt, yet perpetual and rate-sensitive.

Way forward

  • Deepen liquidity, encourage market-making and widen retail and HNI participation.
  • Raise limits only after current ones are largely used.

Exam angle

  • Regulator: SEBI; proposal: MF cap 10% to 20%.
  • Terms: REIT, InvIT, AUM, NAV.

Test yourself

1. SEBI proposed changing the mutual fund investment cap in REITs and InvITs to what level?

The cap was proposed to rise from 10% to 20%.

2. What share of income must REITs and InvITs distribute, limiting reinvestment, as noted in the SEBI cap discussion?

The notes state a mandated 90% income distribution.

3. Mutual fund exposure to REITs and InvITs stood at below what fraction of total AUM?

Exposure was under 0.3% of AUM.