India’s first small and medium Reit faces pushback from existing investors

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₹50 crore and ₹500 crore. However, Propshare's existing investors rejected the migration to SM Reit status. High upfront costs, including a 6-6.5% stamp duty, may have led to the 'no' vote, as indicated by a mail sent out by the platform.

According to Propshare, the high costs are a result of Sebi rules that do not allow co-ownership of property by an SM Reit. The Reit must be a 100% owner of the property and Propshare’s existing entities have co-ownership “According to question #8 in the FAQs shared by Sebi, Reit regulations require that the SPV shall directly and solely own all assets that are acquired or proposed to be acquired by the scheme of the SM Reit, of which SPV is the wholly owned subsidiary. Hence, multiple SPVs cannot jointly own a single property," said Propshare co-founder Hashim Khan.

However, some experts took a contrary view. “I’m not sure if sufficient effort was made to convince investors," said an industry expert who declined to be named. "If migration is properly structured, I don't see why the costs have to be so high.

A simple share swap from one SPV to units of the SM Reit/scheme does not attract stamp duty or income tax implications. You can also cut down on costs by going for a competitively priced merchant banker, since there's no need to find fresh investors for migrating assets. Ultimately, it is about intent - a platform that is serious about migration will make it happen," said Ajay Rotti, founder, Tax Compass.

Propshare has assets under management or AUM of about ₹1,300 crore. Some of this AUM is managed via alternative investment funds or AIFs. Other major players in this space include Strata and Hbits.