The potential Small and Medium <keyword id="19895040" type="General" weightage="20" keywordseo="real-estate" source="keywords">Real Estate</keyword> <keyword id="19895437" type="General" weightage="20" keywordseo="investment" source="keywords">Investment</keyword> Trusts (<keyword id="20968871" type="General" weightage="100" keywordseo="SM-REITs" source="keywords">SM REITs</keyword>) <keyword id="19913381" type="General" weightage="20" keywordseo="market" source="keywords">market</keyword> size in <keyword id="19895063" type="General" weightage="20" keywordseo="India" source="keywords">India</keyword> is expected to exceed USD 60 billion by 2026, real estate consulting firm <keyword id="20060150" type="General" weightage="20" keywordseo="CBRE" source="keywords" meta.keywordsubtype="org" meta.entityname="CBRE" meta.hostid="153" meta.entityid="CBRE">CBRE</keyword> South Asia Pvt. Ltd said in a report. As per CBRE estimates, the potential market for SM REITs in India is over 300 million sq. ft. of completed <keyword id="22958317" type="General" weightage="20" keywordseo="commercial-office-space" source="keywords">commercial office space</keyword>, with an additional 50 million sq ft expected to be completed by 2026. The forecast reflects a growing interest in SM REITs, which are expected to play a key role in shaping the future of India's commercial real estate landscape. The total completed office stock in India currently stands at over 800 million sq. ft., out of which REIT-listed office inventory is recorded at over 88 million sq. ft. Furthermore, according to the report, Mumbai recorded the highest potential SM REIT-ready completed office stock of 75 million sq. ft. as of June'24, with around 10+ mn. sq. ft. of upcoming supply by 2026. Delhi-NCR recorded a completed SM REIT-ready potential stock of 70+ mn. sq. ft., followed by Bengaluru with 50+ mn. sq. ft. and Hyderabad with 30+ mn. sq. ft., as per the report. It is estimated that cumulatively Delhi-NCR, Bengaluru and Hyderabad could add an additional supply of potential SM REIT-worthy stock of 36 mn. sq. ft. by 2026. Other cities such as Pune, Kolkata, and Chennai recorded 25+ mn sq. ft. of completed supply as of June'24. It is estimated that Pune, Kolkata, and Chennai would cumulatively record additional supply of potential SM REIT-worthy stock of 14 mn. sq. ft. over the next two years. The report underscored the importance of the SM REITs, saying that the newly-introduced framework represents a significant step forward for India's fractional ownership landscape. Anshuman Magazine, Chairman and CEO, India, Southeast Asia, Middle East, and Africa, CBRE, said the introduction of the SM REITs framework marks a pivotal moment for India's commercial real estate sector. "By enhancing transparency and offering robust investor protections, SM REITs are set to redefine portfolio diversification. This framework will not only mitigate risks associated with under-construction projects but will also ensure steady returns through mandatory quarterly distributions, making real estate a more accessible and secure investment option for a broader range of investors." Building upon the success of traditional REITs and InvITs, which, according to the Reserve Bank of India, have cumulatively accumulated Rs 1.3 trillion in asset value in the past four years, SM REITs hold immense promise, the report said. It said they offer the potential to unlock price discovery and exit opportunities for investors in smaller, high-occupancy assets. By pooling such assets, SM REITs can drive improved property upkeep, ESG compliance through potential retrofitting, and an enhanced tenant profile. This could ultimately contribute to a more organised and efficient real estate ecosystem with a stronger asset profile, the report mentioned. Moreover, the <keyword id="19908389" type="General" weightage="20" keywordseo="union-budget" source="keywords">Union Budget</keyword>, 2024-25's decision to reduce the holding period for determining long-term capital gains on listed business trusts--REITs and InvITs -- from 36 to 12 months aligns these instruments with listed equity shares, the report said. This tax parity is expected to bolster the appeal of SM REITs as an investment vehicle, it added.

India's SM REITs market value likely to exceed USD 60 billion by 2026: Report

Capital markets regulator <keyword id="20378396" type="General" weightage="20" keywordseo="Sebi-Chief" source="keywords">SEBI Chief</keyword> <keyword id="19922107" type="General" weightage="20" keywordseo="madhabi-puri-buch" source="keywords">Madhabi Puri Buch</keyword> on Monday refrained from commenting on the investment vehicle, <keyword id="20024284" type="General" weightage="20" keywordseo="real-estate-investment-trusts" source="keywords">Real Estate Investment Trusts</keyword> (REITs), saying if she comments on the subject, she will be accused of <keyword id="20339010" type="General" weightage="20" keywordseo="conflict-of-interest" source="keywords">conflict of interest</keyword>. The remarks came as US short-seller <keyword id="20016892" type="General" weightage="20" keywordseo="Hindenburg-Research" source="keywords" meta.keywordsubtype="org" meta.entityname="Hindenburg Research" meta.hostid="261" meta.entityid="Hindenburg Research">Hindenburg Research</keyword> raised questions about a potential conflict of interest involving Buch and private equity major <keyword id="20144468" type="General" weightage="20" keywordseo="Blackstone" source="keywords" meta.keywordsubtype="org" meta.entityname="Blackstone" meta.hostid="261" meta.entityid="Blackstone">Blackstone</keyword>. Her husband Dhaval Buch is a senior advisor with Blackstone, a major player in the <keyword id="20009947" type="General" weightage="100" keywordseo="REIT" source="keywords">REIT</keyword> space. However, the couple refuted the allegations. Also, Hindenburg alleged that SEBI's recent amendments to REIT regulations 2014 favoured a specific financial conglomerate, which the markets regulator denied. Speaking at an event organised by industry body CII, Buch said," If I utter the word REITs, I am accused of conflict of interest". REITs are a new concept in the Indian market but have been a popular choice globally for their lucrative returns and capital appreciation. A REIT is made up of a portfolio of commercial real estate assets, the majority of which are already leased out. Meanwhile, the <keyword id="19895371" type="General" weightage="20" keywordseo="Congress" source="keywords" meta.keywordsubtype="org" meta.entityname="Congress" meta.hostid="261" meta.entityid="Congress">Congress</keyword> on Monday levelled fresh conflict of interest allegations against Buch and asked Prime Minister <keyword id="19895781" type="General" weightage="20" keywordseo="narendra-modi" source="keywords">Narendra Modi</keyword> to come clean as the head of the appointments committee of the cabinet on her appointment. At a press conference, the Congress alleged that since the current SEBI chairperson took office in 2017, she has not only been drawing a salary from SEBI but has also been holding an office of profit at the ICICI Bank, continuing to receive income from them to this very day. SEBI didn't make any comment on the allegations made by the Congress. Last week, the SEBI Chief stated that there has been a positive response to small and medium REITS (real estate investment trusts) and industry players came forward for regulations on such entities. Recently, the Securities and Exchange Board of India (SEBI) implemented regulations for small and medium real estate investment trusts (SM REITS) aimed at significantly increasing investor interest in fractional ownership of real estate assets.

If I say anything on REITs, will get accused of conflict of interest, says SEBI Chief

<ul><li><keyword id="35210" type="General" weightage="20" keywordseo="sebi" source="Orion">SEBI</keyword> has introduced new investment criteria to mitigate risks associated with <keyword id="509133" type="General" weightage="20" keywordseo="fractional-ownership" source="Orion">fractional ownership</keyword> of <keyword id="6354553" type="General" weightage="20" keywordseo="real-estate" source="Orion">real estate</keyword>. </li><li>You should research the <keyword id="6354516" type="General" weightage="20" keywordseo="property" source="Orion">property</keyword>, its location, market trends, and potential risks before investing. </li><li>Fractional ownership platforms operate by purchasing pre-leased commercial properties and dividing the ownership among investors. </li></ul>Owning real estate is not just a financial decision, in many cases, it’s a deep-rooted emotional one for many households. Buying commercial real estate, on the other hand, has always been touted as a wise economic decision. But how can one own such an asset if you can’t afford it given that the price of commercial properties is often too high for most individuals? You can still invest to avail a slice of real estate through fractional ownership! Minimum investment required Previously, the minimum investment required for fractional ownership of real estate varied, typically ranging from ₹10 to ₹25 lakhs. However, most platforms standardised the minimum investment at ₹25 lakhs. With the introduction of new regulations from SEBI, this threshold has been lowered to ₹10 lakhs making it more accessible to a broader range of investors. Fractional ownership options in India are still limited. However, while the concept is relatively new, it has quickly garnered <keyword id="6368449" type="General" weightage="20" keywordseo="investor" source="Orion">investor</keyword> interest. The fractional ownership industry is currently estimated to have ₹4,000 crores AUM and is expected to experience substantial growth, with projections suggesting it could reach a size of $5 Bn+ AUM by 2030, as per a JLL report. The number of platforms offering these investment opportunities is still limited, reflecting the industry's early stage of development. However, there were no defined rules on fractional ownership until SEBI stepped in recently. What SEBI says regarding fractional ownership To safeguard investor interests and foster growth in the Real Estate Investment Trusts (REIT) and fractional ownership market, SEBI has implemented a distinct framework tailored for small and medium (SM) (REITs). “SM REITs are structures that pool funds ranging from at least ₹50 crore to less than ₹500 crore, with the aim of issuing units to a minimum of 200 investors. These funds are utilised to acquire real estate assets, ensuring investors receive income generated from such assets. Going forward, any firm offering product (FOP) intending to establish an SM REIT must seek SM REIT registration from SEBI,” says Sudeep Chandran, Founder and COO of YOURS, a platform for Fractional Ownership of Luxury Second Homes. SEBI has also introduced new investment criteria to mitigate risks associated with fractional ownership. “It mandates that at least 95% of a scheme's assets must be invested in completed and income-generating properties, while the remaining 5% can be allocated to liquid assets. Furthermore, SEBI has issued additional rules and guidelines aimed at enhancing the sector's performance and safeguarding investors' interests," says Aryaman Vir, CEO of WiseX, a real estate investment platform that facilitates fractional ownership. Fractional ownership platforms Fractional ownership platforms operate by purchasing pre-leased commercial properties and then dividing the ownership among investors using a special purpose vehicle (SPV) structure. An SPV is a distinct legal entity set up for the sole purpose of acquiring a specific real estate asset, allowing for a clear separation of this investment from other financial engagements. Investors participate by acquiring securities issued by the SPV, effectively gaining a fractional share in the property. “The costs associated with the acquisition and maintenance of the property are distributed among the investors in the SPV, and these investors then share in the profits and returns from the asset. This sharing takes into account the management and maintenance fees that are levied by the FOP or by appointed third parties. Such a structure provides investors with an accessible route to earn from real estate, offering benefits like rental yields and potential asset appreciation,” says Vir. This model of investment significantly reduces the financial burden on individual investors, allowing them to attain steady income streams and long-term financial returns. Furthermore, it enables investors to diversify their investment portfolios by engaging in various real estate projects located in different areas, with each project having its own SPV. What you should keep in mind Before you enter into an agreement, review the agreement thoroughly to understand your rights, responsibilities, and any potential limitations or restrictions associated with the fractional ownership arrangement. “Like traditional property investment, due diligence is a must. You should research the property, its location, market trends, and potential risks before investing. Consider factors such as property valuation, maintenance costs, and resale prospects,” says Chandran. Also, when you co-own a property through a platform, credibility, reputation, and track record of the fractional ownership platform facilitating the investment also become important. Look for platforms that have a reliable track record of adhering to regulatory guidelines, providing transparent information, and offering robust investor protection mechanisms.

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India's SM REITs market value likely to exceed USD 60 billion by 2026: Report

ANI

If I say anything on REITs, will get accused of conflict of interest, says SEBI Chief

PTI

You can own a fraction of a real estate property, but it pays to keep the following in mind

Anagh Pal