Description

Third amendment to SEBI REIT Regulations introducing new definitions for Institutional Investors and Strategic Investors, modifying eligibility criteria and investment thresholds.

Summary

SEBI has notified the Securities and Exchange Board of India (Real Estate Investment Trusts) (Third Amendment) Regulations, 2025, effective from the date of publication in the Official Gazette (December 9, 2025). This amendment introduces and modifies key definitions in the REIT Regulations 2014, specifically relating to Institutional Investors and Strategic Investors, with significant implications for REIT issuances and investor eligibility.

Key Points

  • New definition of “Institutional Investor” introduced in REIT Regulations
  • Institutional Investor includes: (a) Qualified Institutional Buyers, or (b) Family Trusts or SEBI-registered intermediaries with net worth exceeding Rs. 500 crore based on last audited financial statements
  • Definition of “Qualified Institutional Buyer” aligned with SEBI ICDR Regulations 2018
  • Strategic Investor definition expanded to include four categories: (a) Institutional Investors, (b) Foreign Portfolio Investors not covered under category (a), (c) NBFCs registered with RBI (Middle Layer, Upper Layer, and Top Layer), (d) Other entities specified by SEBI
  • Strategic Investors must invest minimum 5% of total REIT offer size or amount specified by SEBI
  • Investment by Strategic Investors subject to FEMA 1999 provisions and related rules/regulations/guidelines
  • SEBI to consult with respective financial sector regulators before categorizing entities under Strategic Investor category if they fall under another regulator’s jurisdiction
  • Amendment made under powers conferred by Sections 11, 12 and 30 of SEBI Act 1992

Regulatory Changes

New Regulation 2(1)(धक) - Institutional Investor Definition: Introduces “Institutional Investor” as a new investor category comprising:

  • Qualified Institutional Buyers as defined under ICDR Regulations 2018
  • Family Trusts or SEBI-registered intermediaries with audited net worth exceeding Rs. 500 crore

Amended Regulation 2(1)(यछ) - Qualified Institutional Buyer: Replaces existing definition to align with SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, Regulation 2(1)(धध)

Amended Regulation 2(1)(यिख) - Strategic Investor: Completely redefines Strategic Investor to include:

  1. Institutional Investors (as newly defined)
  2. Foreign Portfolio Investors not falling under category 1
  3. NBFCs registered with RBI belonging to Middle Layer, Upper Layer, and Top Layer
  4. Entities as may be specified by SEBI from time to time

All Strategic Investors must invest at least 5% of total REIT offer size, subject to FEMA compliance and cross-regulator consultation provisions.

Compliance Requirements

For REITs Planning Issuances:

  • Must categorize investors according to new definitions when structuring offers
  • Ensure Strategic Investors meet minimum 5% investment threshold
  • Verify net worth criteria for Institutional Investors (Rs. 500 crore based on audited financials)
  • Comply with FEMA provisions for foreign Strategic Investors

For Investors:

  • Family Trusts and SEBI-registered intermediaries seeking Institutional Investor status must maintain audited net worth above Rs. 500 crore
  • Strategic Investors must commit to minimum 5% of offer size
  • Foreign investors must ensure FEMA compliance

For SEBI:

  • Consult with relevant financial sector regulators before categorizing entities as Strategic Investors if they fall under another regulator’s purview

Important Dates

  • Notification Date: December 9, 2025 (Mumbai)
  • Effective Date: Date of publication in Official Gazette (December 9, 2025)
  • Gazette Publication: Tuesday, December 9, 2025 / Agrahayana 18, 1947 (Notification No. 797)
  • SEBI Notification Number: SEBI/LAD-NRO/GN/2025/287

Impact Assessment

Market Impact:

  • Expands pool of eligible Strategic Investors by including upper-tier NBFCs and other SEBI-specified entities
  • Creates clearer pathway for high net-worth Family Trusts (Rs. 500 crore+) to participate as Institutional Investors
  • May facilitate larger institutional participation in REIT fundraising
  • Alignment with ICDR Regulations provides regulatory consistency across capital markets

Operational Impact:

  • REITs will need to update offering documents and investor categorization processes
  • Enhanced due diligence required to verify Institutional Investor net worth criteria
  • Cross-border investments subject to additional FEMA compliance verification
  • SEBI’s inter-regulatory consultation requirement may affect approval timelines for certain Strategic Investors

Investor Impact:

  • Higher barriers for some investors (Rs. 500 crore net worth threshold)
  • Broader participation opportunities for regulated NBFCs in middle/upper/top layers
  • Clear minimum investment threshold (5% of offer) for Strategic Investors provides certainty
  • FPIs gain explicit recognition in Strategic Investor framework

Regulatory Impact:

  • Strengthens investor quality standards in REIT offerings
  • Enhances inter-regulatory coordination through consultation provisions
  • Provides flexibility for SEBI to expand Strategic Investor categories as market evolves

Impact Justification

Fundamental regulatory changes to REIT framework affecting institutional investor definitions, strategic investor criteria, and minimum investment thresholds that will impact REIT fundraising and investor participation