Small and Medium Real-Estate Investment Trusts

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Overview:

The Securities and Exchange Board of India (Sebi) recently introduced amendments to the REIT Regulations of 2014, outlining provisions for the establishment of small and medium real-estate investment trusts, known as SM REITs or micro REITs.

About Small and Medium Real-Estate Investment Trusts

  • These are specialised real estate investment trusts that differ from conventional REITs in their scale and focus.
  • Aim: To regulate the fractional ownership industry and safeguard investor interests, incorporating both commercial and residential properties within the new framework.
  • The minimum subscription size of this scheme unit will be 10 lakh and treated as one unit.
  • The SM REIT scheme requires a minimum of 200 unit holders, excluding the investment manager, its related parties and associates.
  • 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 micro REITs will be able to list with an asset value of at least Rs 50 crore and a maximum of Rs 500 crore.
  • 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).
  • While traditional REITs primarily invest in large-scale commercial properties, such as office buildings and shopping malls, SM REITs concentrate on smaller and medium-sized properties with lower value. 

Q1) What are Real Estate Investment Trusts (REITs)?

A REIT is a company that owns and typically operates income-producing real estate or related assets. They pool money from the investors and invest it in commercial real estate projects.These may include office buildings, shopping malls, apartments, hotels, resorts, self-storage facilities, warehouses, and mortgages or loans.

Source: SM REITs can help investors bet on high-value assets