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India's capital markets regulator, the Securities and Exchange Board of India (SEBI), has proposed a set of regulatory changes aimed at strengthening the infrastructure investment trust (InvIT) framework and improving capital mobilisation. The key proposal would allow InvITs to continue holding infrastructure assets beyond the original concession period, addressing a long-standing structural constraint under existing norms. SEBI has also suggested easing borrowing restrictions, expanding permissible investment avenues for REITs and InvITs into lower-risk liquid mutual fund schemes, and broadening the definition of strategic investors. Together, these measures are intended to enhance operational flexibility, attract long-term institutional capital, and support sustainable infrastructure financing. The regulator has invited public comments on the proposals, signalling a consultative approach as it looks to deepen India's listed infrastructure investment ecosystem.
The Securities and Exchange Board of India has proposed a series of reforms to the regulatory framework governing Infrastructure Investment Trusts, with a view to improving their financial flexibility and ability to attract long-term capital. One of the most significant proposals would permit InvITs to retain infrastructure projects even after the expiry of the original concession period, a departure from the current rule that requires trusts to divest assets once the concession tenure ends. Advertisement
At present, InvITs are mandated to stop holding infrastructure assets after the concession granted by the relevant authority expires, regardless of the asset's operational viability or revenue-generating potential. Market participants have argued that this requirement limits value creation and discourages long-term investors. SEBI's proposal seeks to address this concern by allowing InvITs to continue owning and operating assets beyond the initial tenure, subject to applicable regulations and contractual arrangements.
In addition to asset-retention flexibility, the regulator has proposed changes to borrowing norms for InvITs. Under existing rules, when net borrowings exceed 49% of the asset value, additional debt can only be raised for the acquisition or development of new assets. SEBI has suggested expanding the permitted use of such borrowings to include capital expenditure and major maintenance, which would allow trusts to reinvest in existing assets and maintain service quality without being constrained by rigid debt rules.
SEBI has also proposed broadening the range of liquid mutual fund schemes in which Real Estate Investment Trusts and InvITs are allowed to invest. The focus would remain on schemes with relatively low credit risk, with the objective of balancing flexibility with investor protection. The regulator's chairman had earlier indicated that expanding this investment universe was under consideration, provided adequate safeguards were maintained.
Another area addressed in the proposal relates to the definition of strategic investors. SEBI had previously observed that the existing definition was too restrictive, excluding key long-term capital providers such as public financial institutions, insurance companies, and provident and pension funds. This limitation, the regulator noted, has constrained the ability of InvITs to attract stable institutional investment. Revisiting this definition is expected to widen the investor base and support larger capital raises.
The proposed reforms form part of SEBI's broader effort to deepen India's infrastructure financing market through listed investment vehicles. By improving operational flexibility, easing funding constraints, and widening the pool of eligible investors, the regulator aims to make InvITs more attractive to both domestic and global capital.
SEBI has invited public comments on the proposals, with feedback to be submitted by February 26. The consultation process is expected to shape the final regulatory framework, as the regulator balances the need for growth in infrastructure investment with the protection of investor interests.
Source - Reuters
5th Jun, 2025
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