SEBI Notifies SM REITs to Regulate Fractional Ownership Industry and Safeguard Investors’ Interests
In a significant move aimed at regulating the emerging fractional ownership industry in India, the Securities and Exchange Board of India (SEBI) has announced the notification of Small and Medium Real Estate Investment Trusts (REITs). This decision, applauded by experts in the real estate sector, is poised to have a positive impact on both commercial and residential assets, enhancing transparency and investor protection.
In a significant move aimed at regulating the emerging fractional ownership industry in India, the Securities and Exchange Board of India (SEBI) has announced the notification of Small and Medium Real Estate Investment Trusts (REITs). This decision, applauded by experts in the real estate sector, is poised to have a positive impact on both commercial and residential assets, enhancing transparency and investor protection.
Fractional ownership platforms, which allow individual investors to co-own real estate assets, are estimated to manage over ₹4000 crore in assets under management (AUM). This form of investment has gained popularity as an alternative investment avenue, enabling investors to participate in real estate without the burden of sole ownership.
Kunal Moktan, CEO and co-founder of Property Share, one of the leading fractional ownership platforms, expressed excitement about the new regulations, emphasizing the benefits of a regulated framework for investors, including uniformity, fairness, and access to redressal mechanisms.
The amendments to the Real Estate Investment Trust (REIT) Regulations in 2014 paved the way for the establishment of Small and Medium REITs, known as SM REITs. The SEBI (REIT) (Amendment) Regulations 2024 aim to provide clear guidelines for the formation and operation of SM REITs, thereby enhancing transparency and organization in the fractional ownership segment.
Shravan Gupta, founder and CEO of YOURS, a platform for fractional ownership of luxury second homes, highlighted the importance of these amendments in fostering trust among investors and property owners. The specific regulations for SM REITs are expected to provide assurance to stakeholders and encourage participation in fractional ownership ventures.
The move is anticipated to attract both domestic and foreign retail investors, thereby increasing liquidity in the Indian real estate market. Notably, the minimum subscription amount for an initial offering of an SM REIT has been set at ₹10 lakh per investor, lower than the previous norm of ₹25 lakh, making it more accessible to a wider investor base.
Under the new regulations, SM REITs can raise funds starting from ₹50 crore by issuing units to a minimum of 200 investors. This is expected to bring a larger number of income-generating small and medium real estate assets under the purview of REITs, thereby expanding investment opportunities in the sector.
Piyush Gupta, Managing Director of Capital Markets & Investment Services at Colliers India, welcomed the notification, highlighting the potential it holds for providing liquidity to office-yielding assets. He noted that while the entry barrier for fund managers is not significant, SEBI has implemented key checks and balances to ensure investor protection.
Shiv Parekh, founder and CEO of hBits, emphasized SEBI’s confidence in the fractional ownership model and its potential to democratize access to real estate for retail investors. He believes that the notification will enhance market efficiency and increase awareness among potential investors about the benefits of fractional ownership.
As a pioneer in the fractional ownership model, hBits aims to be the first to list SM REITs, enabling investors to capitalize on this opportunity. Overall, the notification of SM REIT regulations is expected to usher in a new era of transparency, trust, and accessibility in the Indian real estate market, benefiting both investors and property owners alike.
Sources By Agencies
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