IRDAI Evaluating Relaxation of Investment Norms for REITs and InvITs

Insurance Regulatory and Development Authority of India (IRDAI) is reportedly examining a proposal to rationalise investment exposure norms applicable to insurance companies investing in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).

At present, insurers are permitted to invest up to 3% each in REITs and InvITs. Under the proposal currently under consideration, the existing separate exposure limits may be consolidated into a combined 6% ceiling across both asset classes, thereby providing insurers greater flexibility in allocating capital based on prevailing market opportunities and asset performance.

The proposed relaxation is understood to have gained momentum following strong investor participation in the recently launched Raajmarg InvIT sponsored by National Highways Authority of India (“NHAI”). The Rs 6,000 crore InvIT issuance reportedly witnessed significant institutional participation, including from insurance companies, despite the existing exposure restrictions.

Industry stakeholders, including NHAI and infrastructure sector participants, have reportedly sought enhanced participation by insurers in InvIT issuances to facilitate deeper institutional capital formation within the infrastructure sector. The proposed combined exposure framework is expected to allow insurers greater flexibility to participate in infrastructure offerings while continuing to operate within prudential investment norms.

From an infrastructure financing perspective, the proposal assumes significance as InvITs continue to emerge as an important capital recycling mechanism for infrastructure developers and public authorities. While REITs primarily hold income-generating real estate assets, InvITs typically own operational infrastructure assets such as highways, power transmission networks and renewable energy projects. These structures are considered particularly suitable for insurance companies given their long-duration liabilities and need for predictable investment returns.

The proposal further reflects the increasing importance of alternative investment structures in India’s infrastructure financing landscape, particularly as policymakers seek to channel long-term domestic institutional capital towards operational infrastructure assets. A relaxation of investment norms for insurers could potentially strengthen capital flows into infrastructure and commercial real estate sectors while supporting the broader objective of deepening India’s infrastructure investment ecosystem.