The weak balance sheets of the municipal bodies are a challenge in the development of municipal bond market in India, said Securities and Exchange Board of India (SEBI) Chairperson Tuhin Kanta Pandey at an event in Mumbai on September 18, 2025.

“Municipal bonds have been a cornerstone of city-level development, enabling urban local bodies to raise long-term funds for essential projects such as water supply, sanitation, transport, and waste management… challenge lies in project readiness and credibility. Many municipal bodies struggle with weak balance sheets or delayed clearances,” said Mr. Pandey speaking at the Annual Infrastrucutre Conclave of National Bank for Financing Infrastructure and Development (NaBFID).

“While the municipal bond market in India is still at a nascent stage, its potential is immense,” he added.

He called for measures to develop the capital market and make it attractive for institutional and retail investors to invest in municipal and green bonds.

Speaking at the conclave, he also emphasised the need to expand the asset monetisation plan. “There is a need to accelerate asset monetisation in various sectors such as roads, railways, ports, airports, energy, petroleum & gas and logistics. State Governments, barring a few, are yet to crystalise asset monetisation plans to provide further boost to infrastructure creation,” Mr. Pandey said.

He further highlighted the development of the Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) as a new asset class. It is the “most promising avenues for channelising long term capital into infrastructure and real estate”, he said.

SEBI had recently announced that ReITs are now classified as equities, which would make them eligible to be listed on indices and ensure greater participation.