Introduction
In an impactful move to bolster governance and flexibility within Infrastructure Investment Trusts (InvITs), the Securities and Exchange Board of India (SEBI) rolled out the InvIT Amendment Regulations, 2025, effective April 1, 2025. These sweeping changes span board responsibilities, investment horizons, sponsor flexibility, and investor protection—marking a pivotal shift in India's alternative infrastructure finance landscape.
Background &
Context
InvITs are investment vehicles that allow retail and
institutional investors to invest in infrastructure assets. Governed by SEBI’s
original 2014 regulations, InvITs faced criticism over rigidity in governance,
investment options, and sponsor lock-in rules. To address feedback and improve
market dynamism, SEBI launched a consultation paper on InvIT reforms in October
2024, informed by recommendations from its Hybrid Securities Advisory Committee
(HySAC)
In December 2024, the SEBI board approved the proposed amendments, and on April 1–2, 2025, they were officially notified via gazette publication, coming into force immediately
Main News Story
Prompt
Filling of Independent Director Vacancies
Under Regulation 4 of the InvIT Rules, SEBI has clarified
timelines for filling independent director vacancies in investment managers:
· Term expiry: Vacancy must
be filled by the date the position becomes vacant.
· Other reasons (e.g.,
resignation): Vacancy must be filled within
three months of the vacancy arising
Empowered
Trustee Responsibilities & Schedule X
A significant governance overhaul lies in Regulation 9’s new
sub-regulation (23), effective 180 days after the amendment’s gazette
notification (i.e., from October 2025). Trustees are now required to:
· Uphold
transparency, accountability, due diligence, and strict compliance with
regulations
· Act
impartially, prioritize unitholders’ interests, and maintain oversight over the
investment manager and InvIT governance
Schedule X
was introduced to provide an illustrative
(not exhaustive) list of trustee duties, such as:
· Conducting
physical inspections of InvIT assets
· Ensuring
adherence to safety and operational maintenance standards
· Providing
periodic confirmations to SEBI about non-involvement in unit transactions of
managed InvITs
Expanded
Investment Universe
Amendments to Regulation 18 broaden InvITs’ investment options
within their 20% ‘investment bucket’. These now include:
· Unlisted equity shares of
providers offering project management or related infrastructure services,
provided the InvIT wholly holds the entity (directly or indirectly)
· Units of liquid mutual fund schemes
with minimum credit risk value of 12, falling under Class A-I in SEBI’s risk
matrix
· Interest rate derivatives
(futures, forward rate agreements, swaps), allowed only for hedging existing
borrowing, not for speculative purposes. Conditions include disclosures and
adherence to mutual fund valuation norms
Flexibility
in Sponsor Lock-In Unit Transfers
Under the previous framework, sponsors' InvIT units locked-in
under Regulation 12 were non-transferable throughout the lock-in period. Now,
SEBI allows transfers within
sponsor or sponsor-group entities, under the condition that:
· The
units continue to remain locked-in for their remaining duration
· If
there's a change of sponsor, transfers to incoming sponsor or its group are
permissible, provided the transferee meets minimum unitholding norms
· If an InvIT converts to self-sponsored investment manager, the outgoing sponsor's locked-in units may transfer to the self-sponsored manager or its group with similar conditions
Expert Opinions &
Reactions
Legal & Industry
Analysts highlight that the amendments strike a healthy balance
between flexibility and governance. A note from Nishith Desai Associates calls
the changes “pivotal,” especially in relaxing sponsor unit transfer rigidity
while upholding investor protections
Malathi Associates, a Hyderabad-based legal firm, emphasizes the enhanced trustee obligations as a “governance leap forward,” equipping trustees with formal oversight tools to better safeguard investor interests
Impact & Significance
· Enhanced Governance:
Clear trustee responsibilities and rigorous oversight signal improved
accountability.
· Operational Flexibility:
Broader investment options and sponsor lock-in flexibility offer InvITs
strategic agility.
· Investor Confidence:
Strengthened governance and asset oversight may foster greater trust among
institutional and retail investors.
· Market Depth:
Diversification into liquid schemes and derivatives may improve liquidity and
risk management.
· Compliance Burden: Trustees and investment managers now face tighter timelines and expanded duties.
Advantages &
Disadvantages
Advantages:
· Stronger
governance through trustee accountability
· Flexible
investment instruments enable better asset and liability management
· Sponsor
transfers eased—facilitates corporate reorganizations without violating lock-in
norms
· Improved
investor protection by reducing gaps in oversight and reporting
Disadvantages:
· Greater
compliance complexity and operational burden, especially for trustees
· Risk
of overextension into hedging instruments if not managed prudently
· Small InvITs may find expanded obligations and inspections resource-intensive
Case Studies &
Real-Life Examples
While specific InvIT case applications post-amendment are yet
emerging, the following developments indicate momentum:
· June 2025 reforms aligned
disclosure norms between REITs and InvITs, reduced minimum investment
thresholds, and expanded merchant banker roles—setting the tone for broader
market reforms
· Consultation on mutual fund exposure,
April 2025: SEBI proposed increasing exposure limits for mutual funds in InvITs
and REITs, enabling broader capital inflows and liquidity
· Strategic investor inclusion initiative,
August 2025: SEBI sought to include institutional entities (e.g., insurance,
pension funds) as strategic investors in InvITs and REITs—enhancing depth in
capital base
These movements reflect growing confidence and interest in InvITs—now buoyed by enhanced governance and flexibility.
Common
Misunderstandings
· Myth: “Trustees now
control InvIT decisions.” Fact: Trustees have
enhanced oversight duties, but do not manage daily investment decisions.
· Myth: “Sponsors can freely transfer locked-in units.” Fact: Transfers are allowed only within sponsor/group entities and under strict conditions.
· Myth: “InvITs can use derivatives for trading.” Fact: Derivatives are limited strictly to hedging borrowing costs and are subject to mutual fund valuation and disclosure norms.
Conclusion & Future
Outlook
The InvIT Amendment Regulations, 2025 mark a transformative
chapter in India’s infrastructure financing framework—marrying governance rigor
with operational freedom. By mandating trustee accountability, broadening
investment tools, and easing sponsor constraints, SEBI has signalled a
forward-thinking approach toward resilient and investor-friendly InvIT
architecture.
Looking ahead, we anticipate:
· Gradually
sharper implementation of Schedule X obligations by trustees
· Potential
increase in InvIT fundraising, especially from institutional and retail
segments
· Further regulatory refinements to solidify InvITs as robust infrastructure financing avenues
Expert Tip from Learn
with Manika (Optional)
“If you're a trustee or InvIT manager, use this transitional period to build robust oversight systems—like asset tracking dashboards and compliance calendars—for seamless adoption of Schedule X and reporting requirements.”