The Securities and Exchange Board of India (SEBI) is planning its next steps on proposed regulation for web-based platforms that offer fractional ownership of real estate assets. It aims to promote the development of the real estate market, ensure investor protection and foster well-regulated growth for the sector.
Fractional ownership platforms have existed since 2015. The SEBI’s proposed framework categorises these platforms as micro, small, and medium-sized real estate investment trusts (MSM REITs). It says its move addresses the potential risks associated with investing in real estate through fractional ownership platforms, including non-standard selling practices, lack of independent valuation and inadequate information diligence.
The SEBI suggests adding a new chapter to the REIT regulations to bring fractional ownership platforms under regulatory oversight. Its consultation paper clarified that real estate assets offered on these platforms should meet the definition of real estate or property as outlined in the REIT regulations.
Any individual or entity facilitating fractional investment in real estate, including fractional ownership platforms, would be required to register with SEBI as MSM REITs. These REITs would be established as trusts with the ability to create separate schemes for owning real estate assets through wholly-owned special purpose vehicles.