Why in news?
The Securities and Exchange Board of India (SEBI) has issued regulations to establish guidelines for creation of Small and Medium Real Estate Investment Trusts (SM REITs).
- The upcoming regulations will bear the title SEBI (REIT) (Amendment) Regulations 2024.
- Aim – To regulate the fractional ownership industry and safeguard investor interests,bincorporating both commercial and residential properties within the new framework.
- Fractional ownership allows individual investors to co-own commercial or residential properties as an alternative investment route.
Real Estate Investment Trust (REIT)
- A company that owns, operates, or provides financing for income-generating real estate properties.
- Current asset base – Rs.500 crore.
- Role – These pool funds from investors, directing them toward various commercial real estate ventures.
- These investments resemble shares and trade on stock exchanges.
- 3 REITs in India – Embassy Office Parks REIT, Mindspace Business Parks REIT, and Brookfield India Real Estate Trust.
- SMREITs – Small and Medium REIT (SMREIT), which may raise funds from Indian and foreign investors by the issuance of units.
- Fund pooling – It may gather funds starting from ₹50 crore by issuing units to a minimum of 200 investors.
- Fund utilization – Used for acquiring and managing real estate assets, generating income for the investors.
- Ownership of assets – It will be structured through 1 or more schemes, each operating under special purpose vehicles (SPVs).
- An investment manager – They is responsible for setting up an SM REIT and required to
- Have a net worth of at least ₹20 croreHave a separate trustee for oversight.
- Maintain a website detailing all SM REIT schemes enhancing transparency and investor access to information.
| Existing REITs | SMREITs | |
| Listing | Initial Public Offering (IPO) | Similar to REIT |
| Asset completion requirements | At least 85% | At least 95% |
| Minimum subscription amount | Rs.25 Lakh per investor | Reduced to Rs.10 Lakh per investor |
| Investment Manager | To retain minimum of 20% of the total outstanding limits for 2 years | Reduced to minimum of 5% |
Significance – We’re gearing up to introduce fractional ownership opportunities for rent-generating real estate assets, including ultra-luxurious second homes all over the country.
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