New framework for SM-REITs to boost investment in real estate sector: CREDAI

Realtors' body CREDAI has hailed the new framework for Small and Medium Real Estate Investment Trusts (SM REITs), saying that this will boost the inflow of funds in the Indian property market.

Amid rising demand for high-value realty assets, the Securities and Exchange Board of India (Sebi) has notified the framework for SM REITs. The watchdog notified the amended regulations for REITs on March 8, permitting fractional ownership of REITs and it will encompass commercial and residential properties.

Investors can now have fractional ownership of rent-yielding real estate assets by making a minimum investment of Rs 10 lakh.

Commenting on the development, CREDAI President Boman Irani said, "SEBI's decision to amend the regulations and establish guidelines for the creation of SM REITs will provide a significant boost to the inflow of investments in the Indian Real Estate Sector."

The additional transparency and measures to enhance investor's protection, as well as the decision to reduce minimum investment threshold to Rs 10 lakh will encourage participation from retail investors, he added.

"With this move, we project this segment's growth to be on an accelerated path characterised by a more regulated, mature market coupled with added awareness among stakeholders," Irani said.

Somy Thomas, Managing Director, Valuation & Advisory and Capital Markets, Cushman & Wakefield, said SM REITs is a landmark development that can help organise the small commercial offices and other assets in India including tier 2 and 3 cities.

"Investment in real estate is preferred by many Indian families and this measure institutionalises the same and mitigates risks to some extent," he added.

Proptech firm Housing.Com CEO Dhruv Agarwala said the SEBI's recent introduction of norms on fractional ownership in real estate marks a pivotal moment for India's investment landscape.

"For generations, Indians have revered traditional investments like real estate and gold. However, amidst a changing economic landscape, a burgeoning segment of high-net-worth individuals and the upper middle class craves innovation and diversification," he said.

SEBI's progressive regulations would not only democratise access to real estate assets but also foster diversified portfolios for investors, mitigating risks while maximising returns, the Housing.Com CEO said.

"By enabling investors to own a piece of coveted real estate without the hefty price tag of traditional ownership, Sebi's embrace of fractional ownership embodies regulatory adaptability in the face of evolving investor preferences," Agarwala said.

Aankush Ahuja, CEO and Founder, FOIP, said the move will have various advantages for investors. "These include ensuring uniformity, protecting investor interests, promoting fairness and transparency, and providing 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, he added.
"This move creates numerous opportunities for retail and institutional investors to participate in office yielding real estate across various market sizes and product types," Ahuja said.

Sudeep Chandran, Founder and COO of YOURS (a platform for Fractional Ownership of Luxury second homes), said the appetite for co-ownership of luxury properties has been on the rise. "This trend is here to stay. In fact, the recent guidelines on SM REITs will also help in deepening the fractional ownership market," he said.