Markets regulator Sebi on Thursday proposed enhancing limits for investments by mutual funds in REITs and InvITs in a bid to provide more investment avenues and further diversification of such schemes.

The proposal, if implemented, is also expected to increase the capital inflow into the instruments — real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) — broadening their market base and liquidity.

In its consultation paper, Sebi noted that the current single issuer and overall limits of 5 per cent and 10 per cent, respectively, in REITs and InvITs restrict mutual funds desirous of taking exposure in REITs and InvITs as an asset class.

Accordingly, it has proposed relaxing investment restrictions in REITs and InvITs for MF schemes. The single issuer limit should be revised to similar limits applicable to investments in equity or debt instruments — 10 per cent of the NAV (net asset value) of the fund.

With regard to the current overall 10 per cent exposure limit for REITs and InvITs in funds’ NAV, Sebi said the same should be revised to 20 per cent for equity and hybrid schemes. PTI