SEBI’s Regulatory Framework: Empowering fractional ownership in India’s realty market

financialexpress.com:

As fractional ownership of real estate assets has gained popularity in India, the recent regulatory framework consultation paper for online fractional ownership platforms by the Security and Exchange Board of India (SEBI)is a proactive approach towards systematizing the industry. This move will build confidence, attract more capital from both domestic and offshore investors, and help institutionalize Fractional Ownership Platforms (FOPs).

SEBI’s proposed regulatory framework under the listed Micro, Small and Medium (MSM) Real Estate Investment Trust (REIT) mandates that FOPs adopt the REIT structure instead of an SPV structure. This will enhance investor protection by imposing disclosure requirements and ensuring fair practices. Additionally, investors would have more transparency about the assets they own, the risks involved, and their fractional ownership rights and obligations. The framework provides explicit provisions for investment strategy disclosures, valuation, liquidation, and exit for investors.

India’s Grade A commercial segment encompasses a staggering 700 million square feet, representing a substantial valuation of over Rs 7 lakh crore in commercial real estate assets. Out of this the three REITs have a market cap of Rs 55,000 crore and with a few additional office REITs expected this could rise to around Rs 1,50,000 crore. However, the access to the traditional REIT frameworks has been limited to a handful of top Indian developers and large foreign funds. India, however, has a great number of credible midsized developers who have not been able to utilize the REIT structure and as per the above numbers, in just the office space, this could amount to about Rs 5,50,000 core worth of assets. MSM REITs is a