Fractional ownership platforms in India have started the process of registering under the new Securities and Exchange Board of India (SEBI) regulations for small and medium real estate investment trusts (SM REITs). The regulations, which were notified by SEBI in March of this year, aim to govern SM REITs of income-generating and completed properties, including commercial assets, rental housing, warehousing, and hotels.
EFC (I) Ltd, an integrated co-working firm, plans to form an investment manager entity through its wholly-owned subsidiary EFC Ltd to manage the assets and investments of SM REITs. Other platforms such as Strata and WiseX are also taking similar steps to register under the SM REIT regulations.
Under the new regulations, investors can own rent-yielding real estate assets by making a minimum investment of Rs 10 lakh. This move is expected to enhance transparency and increase the participation of both domestic and foreign retail investors, leading to better liquidity in the market.
EFC (I) Ltd’s board of directors has approved a proposal to create a step-down subsidiary under EFC Ltd to act as the investment manager for SM REITs. An application for incorporation of EFC REIT is expected to be filed with SEBI in the next 3-4 months.
In addition to EFC (I) Ltd, WiseX, and Strata, other fractional ownership platforms are also actively pursuing registration under the SM REIT regulations. The companies are working with legal and tax advisors, merchant bankers, and SEBI to meet the operational requirements of the regulations and complete the registration process within the six-month deadline.
The introduction of SM REITs is seen as a positive step towards making real estate investment more accessible in India. By lowering entry barriers and offering diversification opportunities, these REITs aim to attract more retail and institutional investors and boost market confidence.
According to a recent report by JLL India and PropShare, India’s fractional ownership market, estimated at nearly $500 million, is expected to reach about $5 billion by 2030.
The SM REIT regulations allow micro-REITs to list with an asset value of at least Rs 50 crore and a maximum of Rs 500 crore. These micro-REITs can also create separate schemes for owning real estate assets through special-purpose vehicles constituted as companies.
The regulations permit micro-REITs to leverage up to 49% of the scheme’s assets. Investment managers are required to hold at least 5% of the total outstanding units if a SM REIT is not leveraged, and 15% of the units in the case of a leveraged SM REIT.
