Several fractional ownership platforms have commenced the registration process under the recently announced Small and Medium Real Estate Investment Trusts (SM REITs) regulations issued by the Securities and Exchange Board of India (SEBI). These regulations aim to regulate the fractional ownership model for income-generating commercial assets and rental housing.
Strata, a prominent commercial real estate investment platform, has announced its plans to apply for an SM REIT license by the end of this month. The platform aims to integrate eligible assets into SM REITs, fostering investor trust and strengthening relationships with developers. Strata aspires to achieve a total assets under management (AUM) of ₹2000 crore by the end of FY25.
hBits, another fractional ownership platform, intends to file the registration documents shortly and float its first SM REIT offering within three months. The platform plans to offer SM REITs for new commercial assets in the range of ₹75 crore to ₹100 crore, primarily located in major cities like Mumbai, Bengaluru, and Pune. hBits will also migrate its existing properties that comply with the new SM REIT regulations to the new platform. The company aims to double its AUM from ₹365 crore to ₹1,000 crore by the end of the next fiscal year.
WiseX is another fractional ownership platform preparing to register under the SM REIT regulations in the coming months. The platform is collaborating with legal and tax advisors, merchant bankers, and SEBI to ensure compliance with the regulations. WiseX plans to register and obtain the license before the six-month deadline.
Integrated co-working firm EFC (I) Ltd is also entering the SM REIT space. The company intends to create an investment manager entity to manage SM REIT assets and investments through a wholly-owned subsidiary. EFC REIT is expected to be incorporated within the next 3 to 4 months, and an application will be submitted to SEBI.
The introduction of SM REITs is expected to enhance transparency and boost participation of both domestic and foreign retail investors in the real estate sector. Investors will have the opportunity to own rent-yielding real estate assets with a minimum investment of ₹10 lakh. The SM REIT framework provides investors with liquidity and market-driven pricing in a regulated structure, ensuring an organized exit process.
SM REITs differ from traditional REITs in that they allow for the creation of distinct and separate schemes for different real estate assets. This provides investors with the flexibility to invest in specific properties or sectors that align with their investment objectives.
To ensure prudent investment decisions, SM Platforms are required to invest at least 95% of their corpus in completed and rent-generating properties. This reduces the risk associated with investments in under-construction properties. Additionally, a significant portion of these assets must be invested in real estate, with infrastructure investments being subject to specific regulations.
With the implementation of SM REIT regulations, the fractional ownership model gains legitimacy and credibility. The participation of reputed fractional ownership platforms in this space further strengthens the industry and provides investors with a wider range of investment options in the real estate sector.
