India’s real estate investment trust (REIT) market is approaching a defining inflection point, with 2026 set to unlock the next phase of growth. New rules that classify REITs as equity for mutual funds and make them eligible for index inclusion are expected to deepen liquidity, widen participation, and pull REITs firmly into the mainstream of India’s capital markets.

Since the launch of the first Indian REIT in 2019, the market has grown into a significant platform that houses some of the country’s largest Grade A commercial assets. These vehicles collectively represent hundreds of thousands of unitholders, signalling how quickly the structure has been adopted by both institutional and retail investors, news agency ANI reported.

From 1 January 2026, mutual funds and specialised investment funds will classify their REIT investments as equity. Until now, REITs were treated as hybrid or debt oriented exposures, which limited how much equity oriented funds could deploy into them. The reclassification removes that constraint. Equity mutual funds that need to maintain minimum equity exposure will finally be able to allocate to REITs without breaching regulatory restrictions. For the REIT market, this can significantly broaden the pool of potential capital from domestic fund managers who previously had structural limitations.

A second major milestone arrives on 1 July 2026, when REITs become eligible for inclusion in equity indices. The six month transition window gives markets time to adjust, but once the eligibility threshold is crossed, index providers can include REITs based on standard rules related to market capitalization and liquidity. Index inclusion typically leads to higher trading volumes as passive funds and benchmark linked portfolios rebalance. Over time, this can improve liquidity, compress bid ask spreads, and create more efficient price discovery.

These two policy moves signal greater confidence in REITs as equity like instruments that can offer both yield and growth exposure. For a market still in an early stage of evolution, this combination of regulatory support and index visibility can be a powerful growth catalyst.

A market with substantial expansion potential

Despite strong progress since 2019, only about one third of REIT ready office stock in India is currently listed. Many developers and institutional owners continue to hold large Grade A commercial portfolios that can potentially be monetised through future REIT launches. With demand for premium office space improving and leasing cycles stabilising, the next three to five years present an attractive window for new listings.

Between 2026 and 2029, industry observers expect a healthy pipeline of commercial assets entering the REIT ecosystem. This could include fresh acquisitions, portfolio consolidation by existing REITs, and new sponsors entering the market. As more assets are listed, the scale and diversity of the segment will improve, which can help REITs attract deeper pools of institutional money seeking long term rental income visibility.

What 2026 means for investors

For retail investors, the biggest advantage in 2026 will be easier access. As equity mutual funds build REIT allocations into their portfolios, individuals can gain indirect exposure without needing to evaluate or trade each REIT directly. This broadens the investor base and normalises REITs as part of mainstream equity investing.

Liquidity improvements can also make REITs more appealing for investors who previously worried about trading volumes. Higher participation, especially from index linked flows, can reduce volatility over time and create a more transparent market.