SEBI Introduces Framework for REITs and InvITs to Issue Depository Receipts at GIFT City IFSC

Why in News

The Securities and Exchange Board of India (SEBI) issued a circular on 2 November 2026 introducing a framework for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) to issue foreign currency-denominated Depository Receipts (DRs) at the GIFT City International Financial Services Centre (IFSC). The framework took immediate effect. DRs may be listed on the India International Exchange (India INX) and NSE International Exchange (NSE IFSC), both located at GIFT City, Gandhinagar, Gujarat.

Background

What are REITs and InvITs?

Real Estate Investment Trusts (REITs) are regulated investment vehicles that pool capital from investors to own and operate income-generating real estate assets (commercial offices, malls, warehouses, data centres). They are listed on stock exchanges and distribute at least 90% of distributable cash flows to unitholders. SEBI first introduced the REIT framework in India in 2014.

Infrastructure Investment Trusts (InvITs) are similar pooled vehicles that invest in infrastructure assets (roads, transmission lines, gas pipelines, renewable energy projects). InvIT regulations were also introduced by SEBI in 2014. InvITs are categorised as publicly-listed or privately-placed.

What are Depository Receipts (DRs)?

Depository Receipts are negotiable financial instruments issued by a foreign depository bank representing ownership of a specific number of underlying securities (in this case, REIT/InvIT units). They allow foreign investors to invest in domestic assets in foreign currency without navigating domestic exchange infrastructure. The most common forms globally are American Depository Receipts (ADRs) (listed in the US) and Global Depository Receipts (GDRs) (listed on European exchanges).

GIFT City IFSC

The Gujarat International Finance Tec-City (GIFT City) in Gandhinagar, Gujarat houses India's first International Financial Services Centre (IFSC) — a jurisdiction with relaxed regulatory norms modelled on global financial hubs (London, Singapore, Dubai). It is regulated by the International Financial Services Centres Authority (IFSCA), established under the IFSCA Act, 2019.

Current Developments — Key Provisions of the Framework

1. Permitted Issuers

Listed REITs and InvITs registered with SEBI are eligible to issue DRs under this framework.

2. Listing Venues

DRs can be listed on the two GIFT City IFSC exchanges: India INX (India International Exchange) and NSE International Exchange (NSE IFSC).

3. Investor Eligibility

DRs are open to foreign investors only. Indian residents (including NRIs on a repatriation basis) are barred from holding DRs, including through beneficial ownership — preventing round-tripping of capital.

4. Unitholder Approval

Fresh issue of DRs requires prior unitholder approval with at least 75% of votes cast in favour. This high threshold protects existing unitholders from dilution without adequate consent.

5. OFS Cooling-Off Period

The cooling-off period between successive Offers for Sale (OFS) has been reduced from 12 weeks to 8 weeks, improving fundraising flexibility for existing large unitholders.

6. Disclosure and Cross-Filing

Disclosures made on international exchanges must simultaneously be filed with recognised domestic stock exchanges within 24 hours, ensuring information parity between domestic and international investors.

7. Governance

The circular prescribes responsibilities for investment managers, merchant bankers, depositories, custodians, and trustees in the DR issuance process.

Key Facts

• Circular No.: HO/17/11/19(7)2026-DDHS-RAC/I/24930/2026, dated 2 November 2026
• Effective: Immediate
• Instruments covered: REIT units and InvIT units (both publicly listed)
• DR type: Foreign currency-denominated
• Listing venues: India INX and NSE IFSC (GIFT City, Gandhinagar, Gujarat)
• Regulator: SEBI (for REIT/InvIT side); IFSCA (for IFSC side)
• Unitholder approval threshold: 75% of votes cast
• OFS cooling-off period: Reduced from 12 to 8 weeks
• Indian residents: Barred from holding DRs

Constitutional Provisions

• Article 246 read with List I, Entry 38: Stock exchanges and futures markets — Union subject; Parliament legislates on capital markets.
• Article 246 read with List I, Entry 36: Currency, coinage and legal tender; foreign exchange — Union subject underlying FEMA-based capital account regulations.
• Article 19(1)(g): Freedom to carry on trade or business — the fundamental right that capital market access rules engage.

Legal Framework

• SEBI Act, 1992 — Establishes SEBI as the statutory regulator of securities markets; empowers it to issue circulars and regulations.
• SEBI (Real Estate Investment Trusts) Regulations, 2014 — Governs REITs in India.
• SEBI (Infrastructure Investment Trusts) Regulations, 2014 — Governs InvITs in India.
• IFSCA Act, 2019 — Established IFSCA as the unified regulator for all financial services in IFSCs (banking, capital markets, insurance).
• Foreign Exchange Management Act (FEMA), 1999 — Governs capital account transactions; RBI administers FEMA; SEBI circular works within FEMA framework.
• Depository Receipts Scheme, 2014 — The extant legal framework under which DRs by Indian companies are issued; the SEBI circular extends the concept to REITs/InvITs.

Institutional Framework

• SEBI (Securities and Exchange Board of India) — Primary regulator; issued the circular. Headquartered Mumbai.
• IFSCA (International Financial Services Centres Authority) — Unified IFSC regulator, established 2020 under IFSCA Act 2019; GIFT City falls under its jurisdiction.
• India INX (India International Exchange) — India's first international exchange at GIFT IFSC; BSE-promoted.
• NSE IFSC (NSE International Exchange) — NSE's GIFT City subsidiary exchange.
• RBI — Coordinates on the FEMA/capital account dimension; overseas foreign exchange inflows from DR holders.

Economic Dimensions

India's infrastructure financing gap is estimated at USD 1–1.5 trillion between 2024 and 2030 (National Infrastructure Pipeline). The NMP (National Monetisation Pipeline), launched 2021, identified over ₹6 lakh crore of brownfield asset monetisation potential — REITs and InvITs are key monetisation vehicles. The new DR framework addresses a critical gap: while Indian InvITs and REITs were listed domestically, they had no straightforward mechanism to access the global investor base, limiting their fundraising universe.

Banking & Financial angle: For RBI Grade B / IBPS candidates: DRs enable foreign portfolio investment (FPI) into real estate and infrastructure without domestic securities law compliance by the foreign investor. The framework strengthens GIFT City's positioning as a global financial hub, reduces reliance on the Eurobond route for infrastructure financing, and potentially lowers borrowing costs for InvITs by broadening their investor base globally.

India's listed REIT market had three established REITs by 2026 (Embassy REIT, Mindspace REIT, Nexus REIT) with combined assets exceeding ₹1 lakh crore. The InvIT market was larger with 10+ listed InvITs covering roads, power, gas pipeline, and telecom tower assets.

Challenges

• Indian residents are excluded — limiting domestic retail participation in the GIFT City DR ecosystem and raising equity concerns about access.
• Currency risk: DR holders receive returns in foreign currency; underlying REIT/InvIT income is in Indian Rupees — INR depreciation reduces returns, potentially dampening foreign demand.
• Regulatory complexity: DR issuances must comply with both SEBI regulations (domestic side) and IFSCA norms (IFSC side), requiring robust compliance infrastructure.
• Market depth: GIFT City exchanges are still developing liquidity; DR trading volumes may be thin initially.

Government Initiatives

• National Monetisation Pipeline (NMP), 2021: ₹6 lakh crore brownfield asset monetisation target using InvITs, REITs and other structures.
• GIFT City IFSC: Government's flagship financial hub; targeted to rival Singapore and Dubai as an international financial centre.
• InvIT Relaxations (2021–2026): SEBI progressively lowered investment thresholds and improved governance for InvITs to deepen market.
• Budget 2024–25: Extended tax pass-through status for REITs and InvITs to maintain their attractiveness as investment vehicles.

Way Forward

• The GIFT City IFSC needs to deepen secondary market liquidity for DR instruments; IFSCA should consider market-maker incentives to avoid thin trading that deters institutional investors.
• The Finance Commission and NITI Aayog have consistently advocated for scaling InvIT use to accelerate infrastructure monetisation — the DR framework is a key enabler for state-level InvITs to access global capital.
• SEBI should consider extending the DR framework to debt securities of REITs/InvITs to further diversify the GIFT City capital market offering.

Possible Mains Questions

1. "India's National Monetisation Pipeline relies heavily on REITs and InvITs as vehicles. Examine how the SEBI framework for Depository Receipts at GIFT City IFSC strengthens this strategy, and identify the regulatory and market challenges that remain." (GS III — Economy, Infrastructure)
2. "GIFT City IFSC: Vision, progress, and gaps in India's ambition to create a world-class international financial centre." (GS III — Economy)

Possible Prelims MCQs

1. Q. With reference to Real Estate Investment Trusts (REITs) in India, which of the following is correct?
   (a) They are regulated by RBI   (b) They must distribute at least 90% of distributable cash flows to unitholders   (c) They can invest in vacant land   (d) They are not listed on stock exchanges
   Answer: (b) SEBI (REITs) Regulations 2014 require REITs to distribute at least 90% of distributable cash flows. SEBI (not RBI) regulates them; they must be listed; they cannot invest in vacant land.
2. Q. The IFSCA Act, 2019 established a unified regulator for financial services in India's International Financial Services Centres. Where is IFSCA headquartered?
   (a) Mumbai   (b) New Delhi   (c) Gandhinagar (GIFT City)   (d) Bengaluru
   Answer: (c) IFSCA is headquartered at GIFT City, Gandhinagar, Gujarat — the location of India's first IFSC.

Essay Dimensions

1. "India's GIFT City: bridging the gap between domestic ambition and global financial integration."
2. "Infrastructure financing through capital markets: REITs, InvITs, and the future of asset monetisation."
3. "Regulating innovation in capital markets: SEBI's challenge of enabling new instruments while protecting investors."
4. "The FEMA-SEBI-IFSCA triangle: regulatory architecture for internationalising India's capital markets."
5. "From domestic to global: transforming Indian infrastructure assets into globally tradeable instruments."

Interview Questions

1. How do REITs and InvITs differ in terms of underlying assets, investor profile, and regulatory treatment?
2. What is the significance of GIFT City as an IFSC, and how does it compare to global IFSCs like Singapore's GIFT equivalent (MAS) or Dubai DIFC?
3. Why are Indian residents barred from holding DRs issued by REIT/InvITs at GIFT City?
4. How does the National Monetisation Pipeline use InvITs to unlock value from brownfield infrastructure?
5. What is the difference between an ADR, a GDR, and the depository receipts contemplated under SEBI's new REIT/InvIT framework?

FAQ

What is a Depository Receipt (DR)?

A DR is a negotiable instrument issued by a foreign depository bank representing ownership of a specified number of underlying securities. It allows foreign investors to invest in domestic assets in foreign currency. DRs trade on foreign exchanges or, in this case, on GIFT City IFSC exchanges.

What is the difference between SEBI and IFSCA?

SEBI regulates securities markets in India (domestic). IFSCA is the unified regulator for all financial services within India's IFSCs (like GIFT City) — covering banking, capital markets, and insurance in that ring-fenced international zone.

Why is GIFT City important for India's economy?

GIFT City's IFSC aims to capture financial services business that currently flows to offshore centres like Singapore, Dubai, and London. It allows Indian companies to raise foreign capital, list internationally, and conduct cross-border financial transactions within India's regulatory jurisdiction.

Further Reading

• SEBI: www.sebi.gov.in
• IFSCA: www.ifsca.gov.in