SEBI’s REIT-Equity Reclassification & RBI’s Financing Boost: India’s Policy Updates (Oct 5-11, 2025)

The Indian real estate and financial markets witnessed pivotal regulatory changes this week, primarily driven by the Securities and Exchange Board of India (SEBI) and the ongoing effects of the National Real Estate Policy 2025 reforms. These policy moves are set to reshape how property is financed, developed, and invested in across the country, creating a more robust and trustworthy environment for both developers and retail investors, which is directly relevant to the Indian market focus of Assetking.in.

SEBI Reclassifies REITs to ‘Equity’: A Liquidity Game-Changer

The most impactful regulatory update this week came from SEBI, which has formally reclassified Real Estate Investment Trusts (REITs) from ‘Hybrid’ instruments to ‘Equity’ instruments. This change, which was widely discussed following earlier consultation papers, has profound implications for the Indian real estate investment landscape.

Key Impacts of the Reclassification:

• Expanded Investor Base: By being classified as equity, REITs are now accessible to a much wider pool of investors, including Domestic Institutional Investors (DIIs) like mutual funds, which previously faced restrictions on the quantum of ‘hybrid’ products they could hold.
• Index Inclusion Potential: The shift to equity classification makes Indian REITs eligible for inclusion in major domestic and global equity indices (like the Nifty 500 or Nifty MidCap 150). Index inclusion is a monumental catalyst, as it would trigger mandatory passive investment flows from Exchange Traded Funds (ETFs) and index funds, drastically increasing liquidity and trading volume.
• Valuation Re-rating: Increased liquidity and a broader investor base are expected to narrow the existing discounts at which many Indian REITs currently trade relative to their Net Asset Value (NAV). This alignment with global REIT standards, where they often trade at a premium, could lead to a significant valuation re-rating of the entire sector.
• Alignment with Global Markets: This move brings Indian REITs in line with major international markets like the US, Japan, and Australia, where REITs are primarily treated as equity. This global parity is vital for attracting greater capital from Foreign Institutional Investors (FIIs) who prefer a globally harmonized asset class structure.

This reclassification is a major step in the ongoing effort to mainstream REITs as a high-yield, stable, and transparent asset class, offering retail investors an indirect way to own income-generating real estate.

---

RBI’s Push for Transparency and Global Alignment

While the Reserve Bank of India (RBI) maintained its Repo Rate at 5.5% and kept a ‘neutral’ monetary stance in its recent Monetary Policy Committee (MPC) meeting, two other significant, non-rate-related developments this week impact the real estate financing environment:

1. Consolidation of Regulatory Instructions: The RBI has undertaken a massive exercise to consolidate its regulatory instructions into 238 Master Directions, repealing approximately 9,000 circulars. This move, aiming for regulatory clarity and “ease of doing business,” will streamline compliance for all regulated entities, including those involved in real estate finance (like Non-Banking Financial Companies or NBFCs) by providing a single, clear source for all relevant guidelines.
2. Draft Policy for Liberalizing External Commercial Borrowings (ECBs) in Real Estate: A draft RBI policy proposal, which has garnered attention this week, suggests opening the gates for External Commercial Borrowings (ECBs) in all real estate projects that are also eligible for Foreign Direct Investment (FDI). This potential relaxation would allow developers to access cheaper foreign debt for a wider range of projects, including land acquisition for construction of commercial or residential projects—an area previously restricted. This infusion of foreign capital would provide a significant boost to the sector’s financing options and help stabilize the Indian Rupee by increasing dollar supply.

---

RERA and National Policy Enhancements Continue

The foundational reforms under the Real Estate (Regulation and Development) Act (RERA) and the wider scope of the National Real Estate Policy 2025 continue to be refined, reinforcing the commitment to buyer protection and market efficiency.

• Tighter RERA Compliance: State-level RERA authorities are reinforcing regulations, mandating that developers provide real-time project status updates and face increased penalties for delays or misrepresentation. This continuous tightening ensures better accountability for developers and greater confidence for homebuyers, which is especially important for the property tours and news covered by Assetking.in.
• Digital and Mandatory Green Norms: The push for digital registrations and title verifications, possibly incorporating technologies like Blockchain in select states, continues to combat fraud and streamline the transaction process. Simultaneously, the National Policy’s focus on mandatory compliance with green building standards for new projects continues to shape the future of sustainable development in India, often accompanied by incentives like tax benefits and expedited approvals.

---

Conclusion: A Regulatory Climate Favoring Growth and Transparency

The first week of October 2025 has been pivotal for the Indian real estate ecosystem. The reclassification of REITs as equity by SEBI is a landmark decision, set to fundamentally boost liquidity and global investor appeal. Coupled with the RBI’s efforts to streamline regulations and potentially open up cheaper foreign funding avenues for a wider segment of the real estate sector, the policy and regulatory environment is unequivocally geared towards fostering transparency, attracting capital, and protecting consumer interests. These changes collectively create a robust and well-regulated market, which should lead to more stable and attractive opportunities for investors and homebuyers across the Indian market.

Source: The Economic Times