An expert committee set up by the International Financial Services Centres Authority (IFSCA), the unified financial regulator in GIFT City, has recommended a set of reforms for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).
The measures include the introduction of mortgage REITs (mREITs) in GIFT IFSC to provide an alternative channel for real estate financing and support the development of securitisation markets, regulatory parity, and tax relaxations.
Unlike conventional REITs, mortgage REITs focus on providing financing for real estate rather than owning real estate projects, operating more like fixed-income managers. They earn through interest on mortgage-backed securities (MBS). mREITs fund such investments with a combination of equity, debt and other instruments, and earn profits from their net interest margin — the spread between income from mortgage assets and funding costs.
The investments of mREITs are secured by the real estate assets provided as collateral against the loans.
“The way a REIT unlocks the capital invested by a developer in real estate projects and in that process creates a pool of investors looking for such exposure, Mortgage REITs allow unlocking of the capital that banks/NBFCs have lent to the buyers in these projects and bring in investors that have an appetite to take exposure to such debt,” the report adds, highlighting that several other countries, including the United States, Canada, Australia and the United Kingdom, already have mortgage REITs.
Further, the panel has also highlighted the potential for ‘mixed’ and ‘global’ REITs, which would allow asset owners to pool multi-jurisdiction portfolios and offer diversified exposure to a wider set of investors.
The committee, chaired by Ananta Barua, former whole-time member of the Securities and Exchange Board of India (Sebi), also outlines an appropriate approach for Green REITs and emerging structures such as Small and Medium REITs in the financial hub.
In a bid to provide immediate momentum to the IFSC REIT/InvIT ecosystem, the committee has also recommended enabling Sebi-registered REITs and InvITs to access GIFT IFSC exchanges through depository receipts and dual/secondary listings. This may require Sebi to enable the mechanism in consultation with IFSCA.
“This would provide domestic REITs and InvITs access to a wider global investor base, including NRIs and international institutions, while simultaneously creating a strong foundation for the development of the REIT/InvIT ecosystem in GIFT IFSC,” the report notes.
Among the key suggestions are an exemption for investments made by IFSC REITs and InvITs in Indian equities from sectoral caps and the three-year lock-in requirement under the automatic route. Further, the report seeks an exemption for Indian sponsors of such REITs and InvITs from the overseas portfolio investment (OPI) limit to facilitate participation in IFSC-based structures.
The committee has also recommended providing tax parity between IFSCA-registered and Sebi-registered REITs and InvITs by amending the definition of “business trust” under the Income-tax Act, 2025.
“Additionally, it recommends amending Schedule V (Sl. No. 3) to exempt foreign-sourced income from offshore investments in the hands of non-resident unitholders, bringing it on a par with Category I and II AIFs,” the committee noted.
