Comment on Fraction Ownership Guidelines

1) Mr. Shravan Gupta, Founder and CEO of YOURS a platform for Fractional Ownership of Luxury second homes

The recent decision by the Securities and Exchange Board of India (SEBI) is expected to have a significantly positive impact on the emerging fractional ownership sector in the country. This move comes at a time when the market and demand for fractional or co-ownership properties are rapidly growing. The amendments made to the Real Estate Investment Trust (REIT) Regulations in 2014 aim to establish clear guidelines for the formation of Small and Medium Real Estate Investment Trusts (SM REITs).

Through these amendments, the regulatory body seeks to not only regulate and organize the fractional ownership segment but also enhance transparency in the sector. The introduction of specific regulations for SM REITs will provide a level of assurance to both investors and property owners, fostering trust and encouraging participation in these ventures.

2) Mr. Shrinivas Rao, CEO- Vestian said, “SEBI’s notification to regulate small and medium REITs (SM REITs) is a welcome move for the Indian real estate sector. This will regulate the fractional ownership industry and safeguard investor interests, incorporating both commercial and residential properties within the new framework. Moreover, it is expected to boost the participation of domestic and foreign retail investors, and liquidity in the Indian real estate market as an initial offering for an SM REIT is mandated to have a minimum subscription amount of INR 10 lakh per investor, contrasting with the earlier norm where fractional platforms often required an investment of about INR 25 lakh.”

He further added, “SM REITs are now allowed to gather funds starting from INR 50 Cr by issuing units to a minimum of 200 investors instead of the earlier cap of INR 500 Cr. This may bring a large number of income-generating small and medium real estate assets under the purview of REITs.”

3) Mr. Piyush Gupta, Managing Director, Capital Markets & Investment Services, Colliers India
The notification on SM REITs was awaited for long and shall provide a huge boost to providing liquidity to granular holding of Office yielding assets. This opens plethora of opportunities across size and scale of Markets and Products to Retail and Institutional Investors to invest in Office yielding Real Estate. With minimum size of Rs. 50 cr. and minimum holding of 5% of Investment Manager, this isn’t a significant entry barrier for newer Fund Managers however key checks and balances have been provided by SEBI.