In a bid to regulate the fractional ownership industry, the Securities and Exchange Board of India (Sebi) has issued regulations to amend the REIT Regulations 2014, establishing norms for creation of Small and Medium Real Estate Investment Trusts (SM REITs). The move is aimed at regulating and organizing the fractional ownership industry as well as protecting the interests of investors.
The Sebi notification to the SM REITs regulations has come in just less than 3.5 months since the initial approval given by the regulator in setting up of SM REITs which, according to real estate experts, clearly reflects SEBI’s confidence on the potential of the fractional ownership model in democratizing access of retail investors into real estate.
“It is a watershed moment that will act as a catalyst in enhancing market efficiency and increase awareness among potential investors about the benefits of this investment avenue and ensure widespread adoption,” said Shiv Parekh, Founder and CEO, hBits.
Commenting on the notification, Saurabh Vohara, Founder & CEO at ALYF, said, “The SM REIT’s regulations have given a positive pathway for fractional ownership. These regulations safeguard the interests of investors and service providers alike.”
Sebi has introduced these regulations to accommodate smaller asset worth Rs 50 crore to Rs 500 crore with a minimum investment threshold of just Rs 10 lakh for investors.
“As a holiday home fractional ownership platform, we at ALYF are ecstatic by the inclusion of the residential sector along with commercial in this regulation. This allows us to ensure that are investors get easy exits and have complete transparency and trust in our platform & services. We aim to capitalise on these regulations and open this new asset class of holiday homes to a wider audience and change the way Indians own, enjoy and earn from real estate investments,” Vohara added.
As a leading fractional ownership platform in India, hBits is also keen to be the first one to list their SM REITs, thereby allowing their investors to make the most of this. The fractional ownership ecosystem is gaining momentum over the years, and more than Rs 4000 crore of A grade properties have undergone the FOP route and sold to investors over the last few years.
“The constant engagement between industry stakeholders and the regulator has yielded in significant results, with the notification giving the right impetus to make fractional ownership the top choice of investors. Further, the reduction in the minimum investment threshold to Rs 10 lakh will attract a larger pool of retail investors. It will also bolster their confidence and promote democratization in the ecosystem,” said Parekh.