SEBI'S BIG BET ON REITS, INVITS—ARE WE UNNECESSARILY FIXING WHAT ISN'T BROKEN?

Focus should shift to market depth, liquidity & transparency, not higher investment caps

- NIRAV KARKERA

In its latest consultation paper, the markets regulator has proposed loosening investment caps so that mutual funds can channel more money into listed real estate and infrastructure trusts (REITs and InvITs). The intent is clear: attract long-term capital and give fund managers more room to manoeuvre.

But, timing is the issue. These instruments are still battling low investor interest, a thin pipeline, and shallow liquidity. With mutual funds currently investing less than 0.3% of total assets in REITs and InvITs, the proposal to raise the cap from 10% to 20% may be trying to fix a problem that hasn't shown up yet.

Tiny playground with even fewer equipments

The universe of listed REITs and InvITs in India remains extremely narrow—just four REITs and 18 InvITs.

Of the InvITs, only eight are actively traded on exchanges; the remaining 10 are privately placed and see little to no trading activity. Liquidity across the board is thin.

Even the most active REIT—Embassy REIT—records daily trading volumes of just about ₹41 crore. Most others trade in the low single-digit crore range, highlighting an exceptionally shallow liquidity pool.