The Securities and Exchanges Board of India (SEBI), in a bid to widen the investor base of real estate trusts (REITs) and infrastructure trusts (InvITs) and improve inflows, has proposed to allow foreign investors and qualified investor buyers (QIBs) as strategic investors.
Strategic investors
The concept of ‘strategic investors’ was introduced in the REIT and InvIT Regulations to enable investments prior to an offer of units. The intent behind such a category of investors was to instill confidence in the other investors. By bringing in QIBs under the Issue of Capital and Disclosure Requirements (ICDR) as strategic investor, SEBI wants to strengthen the ‘trusts IPOs’.
Strategic investors get allocation before the opening of the issue. They are required to invest at least 5% of the total offer size and can invest up to 25% of the total offer size. Strategic investors enter into a binding agreement with REIT or InvIT and the units subscribed are locked in for a period of 180 days from the date of listing.
Foreign and institutional investors
“Details of the unit subscription are required to be disclosed in the draft offer document or offer document which includes name of each strategic investor, number of units proposed to be subscribed,” said SEBI. The definition of a strategic investor is narrow in scope and does not include many institutional investors like public financial institutions, insurance funds, provident funds, pension funds, etc. who also make investments in units of REITs and InvITs.
It aligns with their investment mandate of long-term, stable, income generating investments. “Such investors, primarily regulated institutional investors, are ineligible to apply under the category in a public issue of REIT and InvIT,” SEBI said. Foreign Portfolio Investors (FPI) who are individuals, corporate bodies or family offices are not QIBs under the ICDR Regulations.
“Hence, it is proposed that FPI who are individuals, corporate bodies or family offices shall not be considered under the category. Amended definition of strategic investor in the REIT Regulations and the InvIT Regulations shall be an infrastructure finance company registered with the Reserve Bank of India (RBI) as a Non-Banking Financial Company (NBFC), Scheduled Commercial Bank, multilateral and/or bilateral development financial institution, systemically important NBFC under RBI,” said SEBI.
Also, the insurance company registered with the Insurance Regulatory and Development Authority of India (IRDAI) and a mutual fund. Public comments are invited on the above-detailed proposals latest by August 22, 2025.