India InvITs Surge: Why Are Retail Investors Absent?
Overview
India's infrastructure investment trusts (InvITs) market is experiencing rapid growth, with funds mobilized and AUM soaring. Despite SEBI's efforts to attract retail investors, including lower thresholds, participation remains minimal due to valuation, liquidity, and perception barriers. Experts highlight the need for better awareness, taxation, and disclosure to unlock the segment's potential for everyday investors.
InvIT Market Booms, Retail Investors Lag
India's infrastructure investment trusts (InvITs) market is on a steep growth trajectory, with funds mobilized surging and assets under management swelling. However, this boom is failing to attract the average retail investor, leaving the burgeoning sector largely in private hands despite regulatory efforts to broaden participation.
Market Surge, Retail Gap
Funds channeled into InvITs leaped to an estimated ₹1.38 trillion in the fiscal year 2025, a dramatic increase from ₹110 billion in fiscal 2020. Assets under management have climbed to approximately ₹6.28 trillion, expanding at a robust 18% compound annual growth rate since fiscal 2021. Projections suggest the InvIT AUM could reach ₹21 trillion by 2030, fueled by asset monetization and strong institutional backing. Yet, this significant expansion has largely bypassed secondary markets and individual investors.
SEBI's Push
The Securities and Exchange Board of India (SEBI) has actively worked to invigorate public InvITs. Rules were eased, including lowering the minimum investment threshold to ₹25 lakh in 2024 and aligning it with primary market levels a year later. SEBI also streamlined the process for converting private listed InvITs into public ones, treating them as follow-on offers.
Valuation and Liquidity Hurdles
Despite these initiatives, retail investor participation remains a mere 5-10% of total assets under management. Experts cite persistent valuation and liquidity concerns. Trading volumes in public InvITs are concentrated, leading to wider bid-ask spreads and higher impact costs compared to Nifty 50 stocks, indicating market illiquidity.
Predictability and Perception Issues
Fund managers note that other asset classes often appear more attractive for short-to-medium term investments, as InvIT returns, typically 12-14%, can be affected by cyclical changes in underlying assets like toll roads and power projects. Furthermore, the intangible nature of infrastructure assets and their long concession periods pose perception challenges for retail investors compared to more tangible real estate.
Awareness and Taxation
"Reduction of threshold is a good stepping stone to deepen the market, but awareness is still low," said Bhavya Bagrecha, fund manager at Bharat Value Fund. Experts suggest that improvements in taxation, similar to exemptions offered for equity products, and enhanced disclosure consistency are crucial to making InvITs a more investable product for a broader audience.
