Revamping a 10-year-old regulation governing real estate investment trusts, India’s capital market watchdog has opened the floodgates to encourage participation by retail investors and high-net-worth individuals (HNWIs) by reducing the minimum subscription amount to INR1 million (USD12,000).
The Securities and Exchange Board of India (SEBI) overhauled the REIT Regulations (2014), allowing the creation of Small and Medium Real Estate Investment Trusts (SM REITs) under the revised SEBI Real Estate Investment Trusts (Amendment) Regulations, (2024).
The revised regulations aim to regulate fractional ownership while mitigating potential investment risks for investors in both commercial and residential properties.
The revised regulations permit REITs to raise funds for as little as INR500 million and use the funds to acquire and manage real estate assets and generate income for investors.
To protect investor interest, the 2024 regulations necessitate detailed disclosure of the assets proposed to be acquired and the income that would be generated from these assets, so investors can make an informed decision. The listing of an SM REIT would mirror an initial public offering with the key difference being the asset completion requirement.
Given the high risk associated with under-construction projects, the SEBI’s revised regulations stipulate that at least 95% of the assets have to be deployed in fully developed and revenue generating properties, thereby restricting investment in under-construction or non-revenue generating properties. This would ensure the scheme generates revenue for investors from the date of investment.
