Realty stocks in focus after Sebi revisits framework for small and medium real estate investment trusts

The market watchdog Securities and Exchange Board of India's (SEBI) move to regulate fractional ownership in real estate is a big positive for investors, note experts. They believe this move will ensure uniformity, protect investor interests, promote fairness and transparency, and provide access to mechanisms for dispute resolution.

"The regulation of the fractional ownership industry under this framework will encompass both commercial and residential properties, thereby enhancing investor protection," said Aankush Ahuja, Founder and CEO, of FOIP. 

Ahuja added that this move creates numerous opportunities for retail and institutional investors to participate in office-yielding real estate across various market sizes and product types. 

Along similar lines, Shravan Gupta, founder and CEO of YOURS, a platform for fractional ownership of luxury second homes, said that through these amendments, the regulatory body seeks to not only regulate and organise the fractional ownership segment but also enhance transparency in the sector.

Moreover, experts also see this move as boosting the participation of domestic and foreign retail investors. "The move is anticipated to boost the participation of domestic and foreign retail investors and liquidity in the Indian real estate market,” said Shrinivas Rao, CEO of Vestian. 

SEBI's move to regulate SM REITs

The market regulator has revised the REIT Regulations 2014, allowing the formation of small and medium real estate investment trusts (SM REITs). The move aims at regulating fractional ownership in the real estate industry for both residential and commercial REITs.

Real estate investment trusts (REITs) allow individuals to invest in large-scale, income-producing real estate. A REIT is a company that owns and typically operates income-producing real estate or related assets.

REITs are allowed only in fully developed and revenue-generating properties.

Under the new framework, SM REITs can raise funds starting at Rs 50 crore by issuing units to a minimum of 200 investors. The funds will be utilised for acquiring and managing real estate assets and generating income for investors. Ownership of these assets will be structured through schemes operating under special purpose vehicles (SPVs), with a net worth requirement of Rs 20 crore for the investment manager.

In the afternoon trade, Nifty Realty and S&P BSE Realty traded over half a per cent lower. At around 1:30 p.m., the Nifty Realty index was down 0.57 per cent and the S&P BSE Realty index traded 0.58 per cent lower.

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