OWNING A SLICE OF PROPERTY

Real estate is a critical component of one's portfolio as it provides income, capital appreciation, inflation protection, and diversification.

-  PRIYA KAPOOR

DEMYSTIFYING SM REITS

Investment route: SPV

Size: INR 50 crores

Type of property: Both Residential and Commercial

Allocation: Can only invest in completed projects

Min. Unitholders: 200

Min. Publicholding: 25% of the issue 

Min. investment : INR 10 lakh

Distribution of cash flows: 95% 

Duration: Quarterly 

But investment in the same has often been regarded as capital intensive and requiring considerable market knowledge. Not every investor has the appetite or knowledge for such an investment. This resulted in the emergence of Fractional Ownership Platforms (FOPS) that allow retail investors to jointly own a piece of real estate asset at a fraction of the actual cost.

While this alternate asset class garnered a significant interest among investors, the absence of set regulations resulted in lack of transparency and questions whether such investments are safe. In order to regulate FOPS, SEBI recently notified amendments to the REIT regulations and introduced a framework for Small and Medium Real Estate Investment Trusts (SM REITs).

WHAT ARE SM REITS?: SM REITs are specialized real estate investment trusts that differ from conventional REITS in their scale and focus and hence are more lucrative. While the exisiting REITs primarily invest in large-scale commercial properties, such as office buildings and shopping malls with a cap of INR 500 crore, SM REITS concentrate on smaller and medium-sized properties with lower value. These are allowed to issue their units with asset value of at least INR 50 crore, and have at least 200 investors to start a fund. With a SM REITs, one can invest in real estate assets with a minimum amount of INR 10 lakh.