SEBI considers PMS, REIT and InvIT market reforms

At the center of the board agenda is a comprehensive revamp of Portfolio Management Services. Under the proposal, PMS managers would be allowed to invest in foreign securities, including listed overseas equities and debt, and overseas mutual funds linked to equities, debt and REITs, subject to FEMA rules, LRS limits and client consent. SEBI is also considering allowing more use of exchange-traded derivatives, with exposure capped at 1.25 times client AUM and as much as 50% of AUM in unhedged equity derivative short positions, while reducing the minimum investment ticket to Rs 25 lakh from Rs 50 lakh and cutting the net-worth requirement for applicants to Rs 2 crore from Rs 5 crore.

That would mark a meaningful broadening of access for affluent investors and a potential growth tailwind for discretionary money managers. It also brings PMS closer to a more flexible, product-driven model at a time when competition from mutual funds, AIFs and global platforms is intensifying.

The board is also expected to examine wider access for foreign portfolio investors in physically deliverable non-agricultural commodity derivatives, another step that could deepen liquidity in India’s commodity markets. If approved, FPIs would need to square off or roll over positions three days before delivery, limiting settlement risk while allowing more international participation.

REITs and InvITs are another key focus. SEBI is considering allowing them to issue depository receipts backed by units, which would let the vehicles raise foreign capital through overseas exchanges, as well as permitting minority investments in under-construction third-party projects within existing limits. The proposals could make listed property and infrastructure trusts more relevant financing tools for India’s build-out, especially as they seek cheaper capital and broader investor bases.

The reforms come alongside moves to standardize AIF investor consent, widen the accredited-investor pool, simplify settlement rules and unify advertising norms across intermediaries. A common advertising code would replace a patchwork of entity-specific rules and move most approvals to post-publication reporting, a change that should cut compliance friction for brokers, fund houses and advisers.

For investors, the immediate significance is twofold: more product flexibility for wealth managers and more capital-market depth for India’s infrastructure and real estate vehicles. For listed REITs and InvITs, foreign funding routes and looser project rules could support growth in assets and cash flows; for PMS providers, the changes could improve fee-earning opportunities, but also increase competition and require tighter risk controls.

The board meeting will show how far SEBI is willing to go in balancing market liberalization with supervision. Any approval would likely be watched closely by domestic institutions, foreign investors and listed trust issuers looking for lower-cost capital and more liquid exit routes.