SEBI Rationalises Investment Flexibility for REITs and InvITs

The Securities and Exchange Board of India (SEBI), vide notifications dated April 16, 2026 (InvIT Amendment Regulations, 2026 bearing reference no. SEBI/LAD-NRO/GN/2026/301 and REIT Amendment Regulations, 2026 bearing reference no. SEBI/LAD-NRO/GN/2026/302) (collectively, the “Amendments”), has introduced changes to the regulatory framework governing Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs). The Amendments primarily relate to investment in liquid instruments and certain structural aspects of InvITs.

A key change introduced by the Amendments is the revision of the minimum credit risk value threshold for investments in liquid mutual fund schemes. The threshold has been reduced from 12 to 10, thereby expanding the range of eligible instruments for such investments.

The Amendments also broaden the permissible risk class categorisation. While earlier restricted to instruments falling within Class A-I, investments are now permitted in instruments classified under either Class A-I or Class B-I under the potential risk class matrix specified by SEBI.

In addition, the Amendments introduce drafting refinements relating to references to Government Securities, treasury bills and repo transactions on Government Securities, with a view to ensuring consistency in regulatory terminology.

More substantive changes have been introduced under the InvIT framework in relation to Special Purpose Vehicles (SPVs). In the context of public-private partnership (PPP) projects, it has been clarified that where acquisition or holding of SPVs is restricted under concession agreements or applicable regulatory provisions, such restrictions will not be treated as non-compliance with InvIT eligibility conditions, and the applicable provisions under Regulation 12 will govern such situations.

Further, the Amendments provide that the conclusion or termination of a concession agreement for an infrastructure project held by an SPV will not, by itself, affect its classification as an SPV, subject to compliance with conditions specified by SEBI. This clarification addresses the treatment of SPVs in cases where concession agreements come to an end.