Sebi notifies small and medium REITs

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₹50 crore by issuing units to a minimum of 200 investors. These funds are to be used for acquiring and managing real estate assets, generating income for the investors. The ownership of these assets will be structured through one or more schemes, each operating under special purpose vehicles (SPVs).

An investment manager responsible for setting up an SM REIT is required to have a net worth of at least ₹20 crore, and a separate trustee will be appointed for oversight. The new regulations will be called Sebi (REIT) (Amendment) Regulations 2024. The process to list an SM REIT will mirror the initial public offering (IPO) by larger REITs, but with a significant distinction in asset completion requirements.

For SM REIT schemes, at least 95% of the assets must be fully developed and generating revenue, compared to the 80% requirement for larger REITs. An initial offering for an SM REIT will have a minimum subscription amount of ₹10 lakh per investor, contrasting with the current norm where fractional platforms often require an investment of about ₹25 lakh. Moreover, the investment manager is mandated to retain a minimum of 5% of the total outstanding units in each scheme for a period of two years, starting from the fourth year post-listing, until the fifth year's end.

This is a reduction from the 15% that was proposed by the Sebi consultation paper. However, SM REITs utilizing leverage must ensure a 15% co-investment by the manager, with leverage capped at 49% of the REIT's assets. "Any regulated product comes with significant benefits for investors - uniformity, investor protection, fairness, transparency and access to redressal mechanisms.