RERA in Real Estate: What Buyers and Builders Need to Know
2024-12-23 01:51:26
SM REITs are structured as individual schemes, similar to how asset management companies (AMCs) launch separate mutual funds, each scheme providing a distinct investment opportunity, primarily in commercial properties.
Fractional real estate ownership firm Property Share aims to launch one small and medium-scale real estate investment trust (SM REIT) scheme per month throughout 2025, according to co-founder and CEO Kunal Moktan in a recent discussion with Moneycontrol.
Fractional ownership allows investors to buy a share or percentage of an asset rather than the full property price.
Property Share recently received approval from the Securities and Exchange Board of India (SEBI) to launch SM REITs under the name Property Share Investment Trust. It is the first entity granted an SM REIT license by SEBI, with infrastructure and real estate firm REPL also now licensed.
"We’ve filed the first draft offer document with SEBI to raise Rs 353 crore for a commercial project on Bengaluru's Outer Ring Road and are awaiting approval. We’re also preparing a second scheme for listing and plan to launch 12 schemes over the next year," Moktan said.
SM REITs function as individual schemes, much like mutual funds by AMCs, with each scheme offering unique investment prospects, largely in income-generating commercial properties. According to SEBI guidelines, SM REITs must invest exclusively in completed assets, unlike traditional REITs that can allocate part of their capital to land or ongoing projects. SM REITs also prohibit related-party transactions.
Real estate experts are optimistic about SM REITs, viewing them as a high-yield avenue for commercial property investment and a tool to organize India’s fragmented office market. Real estate consultant CBRE estimates India’s SM REIT market could reach $60 billion in the near future.
Moktan highlighted that SM REIT investments could yield higher returns due to mandatory investment in finished, rent-generating properties. Listed REITs currently yield around 5-5.5%, whereas SM REITs are expected to yield between 8.5-9%. Property Share’s schemes are aligned with this target, and the firm will explore retail and hospitality sectors as well.
While some industry observers have raised concerns over potential speculation in SM REITs, particularly due to asset sizes between Rs 50 crore and Rs 500 crore, Moktan assured that proper safeguards are in place.
"Our initial scheme is substantial at Rs 353 crore, with a minimum investment size of Rs 10 lakh, reducing speculative risk. Moreover, we plan to list on the mainboard, avoiding the SME board where most speculative activity has occurred," Moktan added.
2024-12-23 01:51:26
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