Sebi Opens Indian REIT Market to Global Capital via Depository Receipts

India's market regulator has authorized Real Estate Investment Trusts and Infrastructure Investment Trusts to issue foreign-currency depository receipts. The twin circulars, issued by the Securities and Exchange Board of India on November 2, unlock a direct overseas capital channel for a domestic market that recently surpassed $20 billion in value.[1][2]

Under the new framework, Indian trusts can issue fresh units or facilitate the transfer of existing units to back the depository receipts. A registered domestic custodian will hold the underlying Indian securities, while a recognized foreign depository issues the corresponding receipts to international investors abroad.[1][3]

The regulator has restricted the trading venues for these new instruments to India's International Financial Services Centre in GIFT City. The depository receipts will list exclusively on the India International Exchange and the NSE International Exchange, ensuring transactions remain within a controlled offshore jurisdiction.[1][4]

This geographic restriction aligns with the government's broader strategy to centralize foreign capital inflows through the Gujarat-based financial hub. By mandating offshore listings, regulators can offer foreign investors a dollar-denominated trading environment while maintaining oversight of the capital entering domestic infrastructure.[2][5]

Strict Guardrails for Foreign Issuance

To prevent domestic capital round-tripping, the regulator mandated that depository receipt holders and their ultimate beneficial owners must be non-residents of India. The foreign depository is explicitly barred from issuing any receipts until the domestic custodian confirms it has received the underlying trust units.[1][3]

Trust managers seeking to raise fresh capital through this route face a high approval threshold. Any new issuance of depository receipts requires a supermajority vote, with at least 75 percent of existing unitholders casting ballots in favor of the resolution.[2][5]

However, the regulator granted an exemption for simultaneous initial offerings. If a trust launches its initial public offering in India at the same time it lists depository receipts on the international exchanges, the prior unitholder approval requirement is waived.[1][3]

The framework also installs a pricing floor to protect local retail investors from dilution. The rules dictate that the price of the units underlying the depository receipts cannot fall below the corresponding price offered to domestic investors during simultaneous offerings.[3][6]

Participating trusts and their transferring unitholders must meet strict eligibility criteria to access the overseas market. Entities debarred from capital markets, classified as willful defaulters, or identified as fugitive economic offenders are prohibited from utilizing the depository receipt mechanism.[2][6]

Fueling Asia's Fourth-Largest Market

The regulatory easing arrives as India's listed real estate sector scales rapidly. The domestic market has expanded more than six-fold since its inception, reaching a market capitalization of 1.72 trillion rupees by early 2026, according to real estate consultancy CBRE.[7]

This sustained growth has elevated India to become Asia's fourth-largest market for real estate trusts, overtaking Hong Kong. Six listed Indian trusts currently manage approximately 178 million square feet of institutional-grade commercial space across the country.[2][7]

The expansion has been driven heavily by sustained demand from multinational corporations establishing operations in the country. Global Capability Centers across major Indian technology hubs like Bengaluru and Hyderabad continue to absorb premium office inventory at record rates.[4][5]

Despite this rapid expansion, industry analysts estimate that only about 37 percent of India's eligible Grade A office stock is currently listed. The remaining two-thirds sits in private hands, constrained partly by historical limits on foreign capital participation in domestic trusts.[2][7]

Easing Private Liquidity Constraints

By enabling depository receipts, the regulator bridges the gap between this expanding asset base and global institutional capital. International funds generally prefer trading foreign-currency instruments on recognized international exchanges rather than navigating the administrative hurdles of domestic Indian registration.[3][6]

Alongside the depository receipt framework, the regulator introduced measures to improve liquidity for privately listed infrastructure trusts. The mandatory cooling-off period for Offer-for-Sale transactions involving illiquid units was reduced from 12 weeks to eight weeks.[1][2]

This cooling-off period applies to unit purchases and sales both before and after a transaction. The regulator cited high trading lot sizes and limited institutional participation as the primary liquidity constraints that necessitated the relaxed timeline for privately listed infrastructure assets.[1][2]

The respective trust managers are required to appoint registered merchant bankers to oversee compliance with the stringent requirements governing the issuance. These bankers will file the initial offer documents with the regulator and the recognized stock exchanges, managing the regulatory clearance process.[1][3]

To maintain parity between domestic and international markets, the regulator imposed strict synchronized reporting requirements. Any disclosures made by the trusts on the international exchanges in GIFT City must be filed with recognized Indian stock exchanges within 24 hours.[1][3]

The framework also clarifies the governance mechanics for overseas investors holding the new instruments. Voting rights attached to the underlying trust units will be exercised by the foreign depository, acting strictly on the voting instructions provided by the depository receipt holders.[1][3]

The immediate implementation of the framework positions GIFT City as the primary conduit for foreign real estate and infrastructure investment. The success of the initial listings will test international appetite for Indian commercial yields without the friction of direct domestic market entry.[2][3]