🟡 CONSULTATION PAPER — NOT YET IN FORCE
Issued by the Securities and Exchange Board of India (SEBI), Department of Debt and Hybrid Securities – POD II, on August 04, 2026. This is a draft proposal open for public comment — it is not a final regulation. Comments are invited until August 25, 2026.
Quick Reference
Introduction
REITs and InvITs have become an established route for institutional and retail investors to gain exposure to income-generating real estate and infrastructure assets in India. Their units trade in Indian Rupees on domestic stock exchanges, and foreign investors can already subscribe to and hold these units subject to RBI and government guidelines. What they cannot currently do is access these instruments the way they access shares of Indian companies abroad — through a foreign-currency Depository Receipt (DR) listed on an international exchange.
Depository Receipts are a well-established mechanism for Indian companies: a foreign depository issues a DR in a permissible jurisdiction against Indian securities held with a domestic custodian, and the DR then trades in foreign currency on an overseas exchange. SEBI's new consultation paper asks whether — and how — this same mechanism should be extended to units of REITs and Publicly Listed InvITs, thereby giving these trusts a new channel to raise foreign capital.
The paper is built on the recommendations of SEBI's Hybrid Securities Advisory Committee (HYSAC) and lays out the legal basis for the proposal, the reason a regulatory gap exists despite that legal basis, and a draft framework (Annexure A) that market participants are invited to comment on by August 25, 2026.
1. Objective: Why SEBI Issued This Consultation Paper
SEBI is seeking public comments on a proposed regulatory framework for the issuance of Depository Receipts against units of Real Estate Investment Trusts (REITs) and publicly listed Infrastructure Investment Trusts (InvITs). The proposals are based on recommendations made by the Hybrid Securities Advisory Committee of SEBI (HYSAC).
2. Background — The Existing Legal Architecture
2.1 The Depository Receipts Scheme, 2014
The DR Scheme, 2014 was notified by the Central Government vide notification F.No. 9/1/2013-ECB dated October 21, 2014, and later amended vide F. No. 9/1/2013-ECB(Pt-2) dated October 07, 2019. It governs how foreign currency instruments can be issued abroad against Indian securities.
📝 Key definitions under the DR Scheme:
- Depository receipt: a foreign currency instrument issued by a foreign depository in a permissible jurisdiction, backed by permissible securities transferred to that depository and held with a domestic custodian; the definition also covers 'global depository receipt' under Section 2(44) of the Companies Act, 2013.
- Permissible securities: securities as defined under Section 2(h) of the Securities Contracts (Regulation) Act, 1956 (SCRA), and also includes similar instruments issued by private companies that (i) a non-resident may acquire under FEMA, 1999, and (ii) are held in dematerialised form.
- Eligible issuers: any Indian company (listed/unlisted, private/public), any other issuer of permissible securities, or any holder of permissible securities — provided they are not barred from accessing the capital market or dealing in securities.
Implementation of the DR Scheme is shared across four authorities: the RBI, SEBI, the Ministry of Corporate Affairs, and the Ministry of Finance.
2.2 REIT and InvIT Units Are Already "Securities"
Under Section 2(h) of the SCRA, 1956, 'securities' include units issued by any pooled investment vehicle. Section 2(da) of the SCRA defines 'Pooled Investment Vehicle' to include REITs and InvITs registered with SEBI — meaning REIT/InvIT units already fall within the SCRA definition of securities that can, in principle, back a Depository Receipt.
2.3 The NDI Rules, 2019
The Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (NDI Rules), notified vide S.O. 3732(E) dated October 17, 2019, govern investment in India by non-residents. Several provisions are directly relevant:
💡 Rule 6(d) allows a non-resident to invest in DRs issued against eligible securities per Schedule IX. Paragraph 1(a) of Schedule IX confirms that any security a non-resident may invest in is eligible for DR issuance under the DR Scheme, 2014. Separately, Rule 6(c) read with Schedule VIII permits non-residents (other than persons from Pakistan or Bangladesh) to invest in units of 'Investment Vehicles' — a term that, under Rule 2(ae), expressly includes REITs and InvITs. Paragraph 1(b) of Schedule IX further confirms eligibility to issue or transfer such instruments to a foreign depository for DR issuance.
2.4 – 2.5 How REITs and InvITs Are Structured
REITs and InvITs are constituted as trusts under the Indian Trusts Act, 1882, and registered with SEBI under the SEBI (Real Estate Investment Trusts) Regulations, 2014 and the SEBI (Infrastructure Investment Trusts) Regulations, 2014 respectively. They issue units representing a beneficial interest in the trust, and unitholders hold a fractional beneficial interest in the underlying real estate or infrastructure assets.
3. Need for Review
REIT and InvIT units are Rupee-denominated and listed on Indian stock exchanges. Foreign investors can already subscribe to and be allotted such units, subject to RBI and government guidelines. However, they currently have no way to hold this exposure through a foreign-currency instrument tradable on an international exchange.
💡 SEBI's stated rationale: a DR framework for REIT/InvIT units would give foreign investors an additional route to trade exposure in a familiar foreign currency on permitted international exchanges, while helping REITs and InvITs attract a broader pool of foreign capital.
4. Proposals
4.1 – 4.3 The Legal Gap
SEBI's analysis concludes that the DR Scheme, 2014 and the NDI Rules, 2019 already permit DR issuance against REIT and InvIT units in principle — units qualify as 'permissible securities', and non-residents are already allowed to invest in them. Any DR investment would, in turn, be subject to FEMA, 1999.
❌ Despite this, there is currently no enabling provision in either the REIT Regulations or the InvIT Regulations that actually permits a REIT or InvIT to issue DRs. The legal permission exists at the DR Scheme/NDI Rules level, but the operative gateway is missing at the REIT/InvIT regulatory level.
4.4 Why Privately Listed InvITs Are Excluded
Privately Listed InvITs carry a trading lot size of Rs. 25 lakh and, at initial offer, may issue units only to institutional investors and body corporates. SEBI notes that these access restrictions cannot realistically be enforced once a DR is issued and traded on an overseas exchange.
❌ Proposed exclusion: DR issuance is proposed only for REITs and Publicly Listed InvITs. Privately Listed InvITs are excluded from the proposed framework.
4.5 Proposed Regulatory Amendments
✅ SEBI proposes inserting an enabling provision worded as follows into both regulations:
"Depository Receipts may be issued against units of a REIT / Publicly Offered InvIT subject to compliance with these regulations and in such manner as may be specified by the Board."
- New Regulation 14(12A) in the SEBI (REIT) Regulations, 2014
- New Regulation 14(4)(ma) in the SEBI (InvIT) Regulations, 2014
4.6 – 4.8 The Detailed DR Framework
For companies, the detailed mechanics of DR issuance are already set out in Section 22 ('Framework for issue of Depository Receipts') under Chapter 1 ('Trading') of SEBI's Master Circular for Stock Exchanges and Clearing Corporations dated December 30, 2024 — referred to in the paper as the 'Equity DR Framework'.
SEBI proposes that a parallel, detailed framework for DR issuance by REITs and Publicly Listed InvITs be issued separately by Circular. A draft of this framework is attached to the consultation paper as Annexure A, and is stated to be built on the existing Equity DR Framework. A tabular comparison of the material differences between the proposed REIT/InvIT DR framework and the Equity DR Framework is attached as Annexure B.
⚠️ Note for readers: Annexure A (draft framework) and Annexure B (comparison table) are referenced in the consultation paper but their detailed contents are not reproduced in this summary. Practitioners should review the full annexures on SEBI's website before finalising comments.
5. Public Comments: How to Submit Feedback to SEBI
SEBI has invited public comments, along with supporting rationale, specifically on: (1) permitting DR issuance for REITs and Publicly Listed InvITs, and (2) the draft framework at Annexure A.
⚠️ Deadline: August 25, 2026. Comments must be submitted through SEBI's online web-based comment form. For technical issues with submission, contact Shri Barun Gurani, Manager, SEBI, at [email protected], using the subject line "Consultation Paper on Issuance of Depository Receipts against units of REITs and Publicly Listed InvITs".
Current Position vs. Proposed Position
Compliance Checklist
☑ Track the comment deadline — submissions must reach SEBI by August 25, 2026 via the online form.
☑ REITs and Publicly Listed InvITs should review Annexure A's draft framework against their existing capital-raising and disclosure processes.
☑ Privately Listed InvIT sponsors/managers should note they remain outside the current proposal and assess whether comments on scope are warranted.
☑ Custodians and foreign depositories already handling equity DRs should evaluate operational readiness to extend services to REIT/InvIT units.
☑ Compliance/CS teams should compare Annexure B's stated differences against the existing Equity DR Framework (Section 22, Master Circular dated December 30, 2024) to flag REIT/InvIT-specific nuances.
☑ Legal teams should assess FEMA/NDI Rules implications for any planned foreign fundraising via this route once the framework is finalised.
☑ Monitor SEBI's website for the final Regulation amendments and Circular following the comment period.
CorpLawUpdates Analysis
The most significant aspect of this consultation paper is not the DR mechanism itself — that machinery already exists and is well understood from equity markets — but the fact that SEBI has identified a genuine regulatory gap between what the DR Scheme/NDI Rules already permit and what the REIT/InvIT Regulations actually enable. This is a clean, narrow fix: two short enabling provisions, backed by a parallel operational circular modelled on an existing framework, rather than a wholesale rewrite of REIT/InvIT regulation.
The exclusion of Privately Listed InvITs is a pragmatic call rather than a policy retreat. SEBI is effectively acknowledging that investor-eligibility restrictions baked into the private InvIT regime cannot follow the underlying units once they are represented by a DR trading on a foreign exchange, where SEBI's jurisdiction to enforce Indian investor-category restrictions is limited. Practitioners advising Privately Listed InvITs should not expect this door to open in this round, though it may resurface as a separate future consultation if market demand emerges.
The real compliance work will sit in Annexure A and Annexure B — the operational and comparative detail SEBI has chosen to circulate as a draft Circular rather than embed in the Regulations themselves. This is consistent with SEBI's general drafting approach of keeping principal-level enabling provisions in Regulations and pushing operational mechanics into circulars that can be updated more easily. REITs, InvITs, custodians, and merchant bankers should treat the annexures — not just the headline proposal — as the primary object of their comments.
Looking ahead, if finalised, this framework would give India's REIT and InvIT market a genuinely new foreign capital-raising channel, potentially deepening liquidity and valuation discovery for these instruments internationally. Given the relatively short comment window (three weeks), market participants with substantive concerns — particularly around custody arrangements, FEMA reporting, and unit fungibility between the domestic and DR markets — should not delay their submissions.
Source Document: Consultation Paper on Issuance of Depository Receipts against Units of REITs and Publicly Listed InvITs
Issuing Authority: Securities and Exchange Board of India — Department of Debt and Hybrid Securities, POD II
Date Issued: August 04, 2026
Comment Deadline: August 25, 2026
This article is for informational and educational purposes only and does not constitute legal or regulatory advice. Verify with primary regulatory sources before acting.
