Disclaimer: Education only, not legal or investment advice. SEBI amends these rules frequently. Always read the current InvIT Regulations and the latest Master Circular. Figures are as of the date shown at the end of the page.

In simple words (if you are in class 10)

A cricket match has rules so nobody cheats. SEBI is the umpire for InvITs. The main rules are:

  1. Share the cash. At least 90% of spare cash must go to unitholders.
  2. Don't borrow too much. Like a family that should not take loans bigger than it can repay, an InvIT has a borrowing limit.
  3. The founder must stay invested. The sponsor cannot sell everything and run away on day one.
  4. Buy mostly finished things. Most money must be in roads or lines that already earn money.
  5. Get a fair price check. An independent valuer checks the value regularly.
  6. Tell everyone what's happening. Regular reports, ratings and votes.

The professional view

Up to 25%25–49%49–70%Not allowedNo extra conditionsRating + unitholder approvalAAA, 6 distributions, 75% votepermitted uses only0%70%
InvIT borrowing bands (net borrowings ÷ value of InvIT assets)SEBI InvIT Regulations, regulation 20, as amended to April 2026.
15%Years 1–35%4–53%6–102%11–201%After 20
Minimum sponsor holding over the life of an InvITFrom year 4, the minimum is the lower of the percentage shown or units worth ₹500 crore. Source: 2023 amendments, as summarised by Cyril Amarchand Mangaldas.

1. Distribution of net distributable cash flows (NDCF)

  • At least 90% of NDCF must be distributed, at both the SPV/HoldCo level (to the InvIT) and the InvIT level (to unitholders). CARE's summary notes HoldCos distribute 100% of what they receive, subject to the framework (CARE).
  • Revised NDCF framework: SEBI circulars SEBI/HO/DDHS/DDHS-PoD/P/CIR/2023/184 and 185 dated 6 December 2023 set a standard computation, effective 1 April 2024. The 90% test is met "for a given financial year on a cumulative periodic basis", and restricted cash is excluded (Taxmann summary; NSE copy of circular). Commentators also read the framework as barring debt-funded distributions (Mondaq).
  • Frequency and timing: public InvITs must declare distributions at least once every six months; privately placed InvITs at least once every financial year (CARE; Bajaj AMC explainer). Many public InvITs pay quarterly by choice. Distributions are paid within 15 days of declaration; if late, the investment manager owes unitholders interest at 15% a year (as set out, for example, in Cube Highways Trust's distribution policy).
  • HoldCo netting (2025): SEBI's Board allowed a HoldCo with negative own NDCF to offset it against cash received from SPVs, with disclosure (Indian Infrastructure, Sep 2025).

How NDCF is built is covered in Part 7.

2. Borrowing (leverage) limits

Measured as aggregate consolidated borrowings and deferred payments, net of cash and cash equivalents, as a percentage of the value of InvIT assets:

Net borrowings / asset value Conditions
Up to 25% No additional conditions
Above 25% up to 49% Credit rating, and approval of unitholders (simple majority)
Above 49% up to 70% AAA rating; track record of at least six continuous distributions; approval of 75% of unitholders (by value); funds used only for acquisition or development of infrastructure projects
Above 70% Not permitted

Sources: Vinod Kothari, Feb 2026 (current matrix, regulation 20(3)); 2019 increase to 70%: Khaitan & Co.

InvITs above 49% also face more frequent valuation and extra disclosures (asset cover, debt-equity, DSCR, ISCR, net worth) per the 2019 amendments.

2026 change: a SEBI consultation of 5 February 2026 proposed allowing borrowing above 49% also for capex that improves asset performance, non-routine major maintenance of road projects, and refinancing of original development debt (principal only). The SEBI Board approved the relaxations on 23 March 2026. Regulation 20(3)(b)(ii) was amended on 17 April 2026, and a SEBI circular of May 2026 brought them into effect immediately (LiveLaw Biz, 15 May 2026; TaxGuru). This is directly relevant to toll roads, where periodic resurfacing is a large lumpy cost.

3. Sponsor unitholding

From 16 August 2023, sponsors must keep a minimum holding for the life of the InvIT on a sliding scale (Cyril Amarchand Mangaldas alert, Aug 2023; Shardul Amarchand Mangaldas alert):

Period from listing Minimum sponsor holding
Up to year 3 15% of units
Years 4 to 5 Lower of 5% of units or ₹500 crore
Years 6 to 10 Lower of 3% of units or ₹500 crore
Years 11 to 20 Lower of 2% of units or ₹500 crore
After year 20 Lower of 1% of units or ₹500 crore

The same amendments created a route for a self-sponsored investment manager (sponsor exit) with strict conditions: 5 years' listing, 12 continuous distributions, AAA rating for 5 years, and 75% unitholder approval.

4. Investment conditions

  • Public InvITs: at least 80% of asset value in completed and revenue-generating infrastructure projects; up to 10% in under-construction projects within the remaining 20%. A "completed and revenue-generating" project has reached commercial operation, holds operating approvals and has earned revenue for at least one continuous year (Vinod Kothari).
  • SPV status after concession expiry: an SPV must hold at least 90% of its assets in infrastructure projects. SEBI proposed in February 2026 that SPVs with expired concessions keep their status for a limited period, with the manager required to exit or add a new project within one year.

5. Valuation

  • Full valuation by a registered valuer at least annually, with a half-yearly update for public InvITs (CARE). InvITs with leverage above 49% also value for the June, September and December quarters (Khaitan & Co on the 2019 amendments).
  • NAV per unit is disclosed and used, for example, to test the ₹500 crore sponsor threshold.

6. Governance and investor rights

  • Unitholder approval for related-party transactions above set thresholds, for leverage above 25%, for changing the manager and other key matters.
  • Unitholder nominee director: unitholders holding 10% or more (alone or together) can nominate one director to the investment manager's board (SEBI circulars, 11 September 2023).
  • Investor charter for InvITs: SEBI circular, June 2025.
  • Minimum public unitholding: 25%. A listed InvIT below that must reach 25% within three years of listing (Regulation 14(1A)); SEBI circulars of 27 June 2023 (SEBI/HO/DDHS/PoD2/P/CIR/2023/106 and 107) list the permitted methods (Taxmann).

7. Market access changes worth knowing

  • 2019: minimum public-issue subscription cut from ₹10 lakh to ₹1 lakh and trading lot to 100 units (Khaitan & Co). In 2021 SEBI cut the trading lot to one unit and set the minimum application in public issues at ₹10,000 to ₹15,000 (Taxmann).
  • 2025: private InvIT allotment lot reduced to ₹25 lakh; QIB holdings of sponsor-related parties can count as public.
  • Mutual funds: from 1 January 2026 REIT units are treated as equity-related for mutual fund investment; InvIT units remain hybrid (Vinod Kothari).

Questions a Big 4 partner would ask in a review

  1. Does the NDCF statement reconcile to the cash flow statement, and is every adjustment within the SEBI framework?
  2. Has any distribution been funded, directly or indirectly, by borrowing?
  3. Is leverage measured using the latest valuation, net of unrestricted cash only?
  4. Are related-party acquisitions supported by two valuations and fairness opinions where required?
  5. Do SPV loan covenants (cash traps, DSRA) conflict with the 90% distribution rule, and how is that disclosed?

Sources

Previous: Part 2 · Next: Part 4: How InvITs are taxed

Education only. This page is not investment, tax, legal or accounting advice, and it does not recommend buying, selling or holding any security. Laws and rules change: check the linked primary source and consult a qualified professional before acting.

Last reviewed 25 October 2026. Spotted an error? Tell us and we will correct it.