The Securities and Exchange Board of India (Sebi) has announced that investments made by Mutual Funds (MFs) and Specialised Investment Funds (SIFs) in Real Estate Investment Trusts (REITs) will be treated as equity-related instruments from January 1, 2026. The move is aimed at encouraging greater participation in the REIT market, reported news agency ANI.Sebi said it had amended the Sebi (Mutual Funds) Regulations, 1996, to enable this shift in classification. In a circular issued on November 28, the regulator stated, “With effect from January 01, 2026, any investment made by Mutual Funds and SIFs in REITs shall be considered as an investment in equity-related instruments.”The regulator clarified that REITs will be eligible for inclusion in equity indices from July 1, 2026, allowing for a six-month transition period. Infrastructure Investment Trusts (InvITs), however, will continue to be categorised as hybrid instruments for MFs and SIFs.Sebi also said existing REIT investments held by debt schemes of Mutual Funds and SIF strategies as of December 31, 2025, will be “grandfathered,” ensuring current portfolios are not forced to comply with the new classification immediately. Grandfathering typically shields ongoing investments or policies from updated rules.Despite this protection, Sebi has encouraged Asset Management Companies (AMCs) to gradually divest REIT holdings from debt schemes, considering market liquidity and investor interests.The regulator said the changes have been introduced “to protect the interests of investors in securities and to promote the development of, and to regulate the securities market”.