New SEBI Rule 2026: AMFI to Label REIT
Mutual Fund Schemes as Equity

Effective from January 1, 2026, mutual funds and SIFs (Specialized Investment Funds) would count their investments in REITs (Real Estate Investment Trusts) as investments in equity funds and other equity-related instruments under the new guidelines set forward by SEBI, India's capital markets regulator.

Before this, REITs were treated differently, such as hybrid/other categories.

The purpose of this rule is to increase the investments in these real estate options that have been overlooked in Mutual Funds.

Investments in Infrastructure Investment Trusts, or InvITs, will still be categorized as hybrid mutual fund and SIF investments.

Any current REIT investments held by debt mutual fund schemes and SIF investment strategies as of December 31, 2025, would be safeguarded, according to the latest announcement from SEBI.

Mutual Fund AMCs are urged to try to eliminate REITs from the portfolios of their respective debt schemes.  According to SEBI, fund houses must take investor preferences, liquidity, and the state of the market into account.

The industry governing AMFI should include REITs in the list of companies categorized by market capitalization, according to the regulator

To update the scheme documentation and make the required modifications, Asset Management Companies (AMCs) are required to publish an amendment.  The scheme will not be viewed as fundamentally altered by this update.

It further said that, "Any addition of REITs to the equity indices will only happen after a waiting period of six months, starting from July 1, 2026.".

AMFI also plans to tag REITs as Equity in January 2026:

AMFI's stock classification list, which essentially serves as a guide for reorganizing large-cap, mid-cap, and small-cap assets, is constantly monitored by mutual fund managers.  Although there wouldn't necessarily be significant inflows or outflows as a result of this reclassification, active equity fund managers must align their portfolios within a month of the new list being released.  The fund management has complete control over how much they modify.

The official January 2026 list should be released in the first week of 2026. AMFI releases these reclassifications twice a year. The decision may make REITs more appealing options for diverse portfolios by allowing more mutual fund capital to flow into them.

In order to encourage outreach in B-30 cities and among female investors, SEBI has also redesigned the mutual fund distributor incentive system. Distributors will receive 1% of the first application amount (which is capped at Rs. 2,000/- per investor) for each new eligible investor starting on February 1, 2026, thanks to AMCs' investor education allocation.

What are the Benefits?

This change guarantees that MFs' and SIFs' investments in REIT units will now fall under the equity allocation category, giving fund managers more flexibility and encouraging greater investor engagement.

It will enable higher allowable exposure limits for funds that would otherwise be limited under non-equity allocations. The updated classification will help improve portfolio alignment.

Further, it indicates the desire to adhere to global standards and encourage greater investor involvement.  It is anticipated that this modification, combined with revisions to the distributor incentive structure, will facilitate the growth of alternative investment opportunities in Indian markets.

New to REITs? Start Here!

With SEBI officially classifying REITs as equity from 2026, this asset class is set to become a major part of many portfolios. But how exactly do they work, and why are they called "Mutual Funds for Real Estate"?

Before you adjust your portfolio, watch our complete beginner’s guide to understanding REITs, their returns, and taxation in India.

Watch the full breakdown here: India’s REIT Explained: Real Estate Investing for Beginners