SEBI is set to establish a self-regulatory organisation (SRO) for small and medium real estate investment trusts (SM REITs), distinct from the Indian REITs Association. SM REITs, including Property Share Investment Trust, Impact R SM REIT, and Emberstone SM REIT, focus on commercial real estate with a mutual fund-like scheme structure. The sector's trajectory hinges on the success of PropShare Platina, India's first SM REIT IPO, aiming to raise INR 353 crore. While initial subscription has been slow, SEBI's initiative reflects efforts to support the unique requirements of SM REITs, positioning them as key players in India's real estate market.
Small and medium real estate investment trusts (SM REITs) will soon have a dedicated self-regulatory organisation (SRO) as their apex body, a move reportedly endorsed by the Securities and Exchange Board of India (SEBI), sources revealed. These SM REITs, previously fractional ownership platforms, have recently begun registering with SEBI and will not be included under the Indian REITs Association (IRA), according to the sources.
The regulator believes that SM REITs require separate regulation due to their distinct characteristics compared to traditional REITs. As a result, a new apex organisation will likely be formed to address the specific needs of these entities. Currently, three SM REITs have been registered: Property Share Investment Trust, Impact R SM REIT, and Emberstone SM REIT.
In contrast, IRA, the non-profit organisation established under SEBI's guidance, counts the four largest listed REITs-Embassy Office Parks REIT, Mindspace Business Parks REIT, Brookfield India Real Estate Trust, and Nexus Select Trust-as its members.
While fractional ownership platforms were integrated into the REIT regulations following an amendment earlier this year and the notification of a new regulatory framework, their operations differ significantly from those of traditional REITs.
SM REITs, which focus on investing in and developing commercial real estate assets, allow investors to participate by subscribing to units, but their fundraising activities resemble those of mutual funds. Each property or asset is associated with a specific scheme, where funds are raised through unit issues. This structure includes multiple schemes, with different assets placed under separate schemes.
The fortunes of SM REITs are now closely tied to Property Share's inaugural SM REIT IPO scheme, PropShare Platina, which aims to raise INR 353 crore with a unit price band of INR 10-INR 10.5 lakh. The response from investors will play a crucial role in determining the future of SM REITs.
In conclusion, the move to create a dedicated self-regulatory body for SM REITs reflects SEBI's efforts to address the unique needs of this growing sector. With the success of the PropShare Platina IPO, SM REITs are poised to play a significant role in India's real estate market, attracting both individual and institutional investors.
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