The Securities and Exchange Board of India has notified the regulations for small and medium real estate investment trusts and specified that investment managers of such REITs should have a minimum net worth of 320 crore and REITS can raise a minimum of 350 crore from at least 200 unit holders. The markets regulator had issued a consultation paper on small and medium REITs with the intention of bringing unregulated fractional ownership platforms under its ambit.
In November, it approved the launch of such REIT sbut the detailed framework for their issue has been issued now. Under fractional ownership, several people pool in funds to purchase and own mainly, commercial property in India. The size of the asset proposed to be acquired in a scheme would be in the range of I50t0I500crore. For SM REITs, at least 95 per cen to finve stmen tsshouldbe in revenue generating assets and they cannot invest in under construction or non-revenue generating real estate assets.
This is a big difference compared to larger REITS, for whom the threshold is 80 per cent in rent-generating assets and they confounder- const ruction assets too. Minimum unit holding requirement at all times for the first three years after listing by the sponsor or investment manager is Spercent foran SMREIT that does not have any debt borrowings and 15 per cent for a REIT high-stake on leverage. “This opens a plethora of opportunities across size and scale of markets and products to retail and institutional investors to invest in office yielding real estate,” said Piyush Gupta, Managing Director, Capital Markets & Investment Services, Colliers India.
“With minimum size of 50 crore and minimum holding of 5 per cent of investment manager, this isn't a significant entry barrier for newer fund managers. However, key checks and balances have been provided by SEBI,”headed. Shrinivas Rao, CEQ, Vestian, said that the minimum subscription of 310 lakh per investor will further boost the participation of retail investors, “contrasting with the earlier norm where fractional platforms often required an investment of about 3251lakh.”
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