Sebi Moves to Expand Mutual Fund Horizons with REITs and InvITs

Sebi proposes increasing investment limits for mutual funds in REITs and InvITs to enhance diversification and capital inflow. The regulator suggests revising single issuer limits to 10% of NAV, aligning them with equity or debt instruments, and raising overall exposure limits for equity and hybrid schemes to 20%.

In a significant move, the Securities and Exchange Board of India (Sebi) on Thursday put forth a proposal to boost investment capacities for mutual funds in REITs and InvITs. This initiative aims to open up new pathways for investment and diversification within these schemes.

Sebi's consultation paper highlights that current limits of 5% for single issuers and 10% overall in REITs and InvITs disproportionately restrict mutual funds from tapping into these assets. The proposed changes would adjust single issuer limits to 10% of the fund's net asset value, akin to those for equity or debt instruments.

The overall exposure cap for REITs and InvITs would rise to 20% for equity and hybrid schemes while maintaining a 10% limit for debt schemes, considering their increased risk and perpetual nature. Sebi aims to adapt the limits based on market conditions, with public feedback open until May 11.

(With inputs from agencies.)