The Securities and Exchange Board of India (SEBI) has proposed to increase the investment limit for mutual funds (MFs) in the Real Estate Investment Trust (RIITS) and Infrastructure Investment Trust (Invites) in the consultation paper issued on Thursday. The aim of this step is to provide more diversity opportunities for mutual fund schemes. Also, there is a relatively new investment means to increase capital flow and liquidity.
The limit of mutual fund investment in retts and invits under SEBI rules is limited to 10 per cent of a net asset value (NAV) of a scheme while this limit is maximum 5 per cent in a single issuer company. Globally, Rits and Invits are often classified as equity and include indices such as MSCI India Small Cap Index and FTSE India Index.
However, SEBI’s Mutual Fund Advisory Committee and Association of Mutual Funds in India (AMFI) currently see them as hybrid means due to their unique cash flow structures and evaluation methods. The market regulator has sought comments from the common people and the industry as to whether the retras and invitces should be classified as equity and thus allowed to include in equity indices for fund investment.
In addition, SEBI has proposed to increase the limit in a single issuer company from 5 % to 10 per cent of the fund’s NAV. Additionally, the overall risk limit of 10 per cent for retts and invits can be revised up to 20 per cent for equity and hybrid schemes. SEBI said, although it can be limited to 10 per cent for loan schemes, as retts and invites are relatively more risky than debt means.
Currently, four rites and 17 invitations are listed on stock exchanges. Another invite is going to be listed soon. However, there has been no trading in other other than eight invites. As of December 31, 2024, mutual funds had retts and invites worth Rs 20,087 crore, with an average investment of equity schemes 2.1 per cent, average investment of loan schemes 3.7 per cent and 2.4 per cent of hybrid schemes.
First Published – April 17, 2025 | 10:16 PM IST
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