SEBI has come out with a consultation paper proposing higher mutual fund exposure to REITs and InvITs. If you invest through MFs, it’s something worth checking out.
REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts) are ways to invest in real estate and infrastructure without actually owning a property or project. They put money into things like office buildings, malls, highways, and power lines. You get units, which are similar to shares, and you earn from the rent or tolls collected, along with any increase in value. Since they’re listed on the stock exchange, you can buy and sell them just like stocks.
Currently, mutual fund schemes can invest only up to 10% in REITs and InvITs, and not more than 5% in one issuer. The paper proposes increasing this limit to 20% for equity and hybrid schemes and keeping it at 10% for debt schemes, since these are considered relatively riskier than regular debt.
They’re also asking whether REITs/InvITs should be considered as equity. But that’s still being debated. Considering equity might confuse mutual fund investors who expect their equity funds to invest in stocks. For now, the preference is to keep them under the hybrid category.
Here’s the consultation paper: SEBI Consultation Paper on Investment by Mutual Funds in REITs and InvITs
You can even give feedback to SEBI till May 11: Public comments
Do yu think giving mutual funds more room in REITs and InvITs helps long term investors? Should these be considered as equity? Thoughts?