What is SM REITS | Understanding SM REITS Regulations | Fractional Ownership

SEBI released SM REITS regulations in March 2024, and these regulations have become a hot topic in real estate fractional investments. Watch this full video to get key insights on the topic.
The panelists discuss the ins and outs of SEBI's recent SM REIT regulations and viewers are taken through the basics of REITs and the latest SEBI regulations, explained in straightforward terms:
The video defines Real Estate Investment Trusts (REITs) and their role in investing in real estate properties to generate returns for investors. These are the recent amendments to SEBI regulations concerning REITs.
Structure of REITs and SM REITs
They discuss the structure of REITs and SM REITs, focusing on the role of sponsors, trustees, and investment managers. Both high-end REITs and SM REITs involve a sponsor forming an entity, registering it with SEBI, and launching a scheme detailing the asset to be invested in.
Funds are pooled from investors, and an investment manager and trustee are appointed to manage the asset and protect investor interests. However, in SM REITs, the sponsor and investment manager are the same entity, simplifying the structure.
The conversation explores the potential migration of fractional ownership platforms to SM REITs, considering factors like asset size and investor count. It highlights the importance of adhering to SEBI regulations and forming SPVs (Special Purpose Vehicles) to hold properties, emphasizing the need for clarity and compliance in the evolving regulatory landscape.
Key Factors to Note and Understand in SM REIT
They further explore various factors related to SM REITs, focusing on investor concerns, migration processes, and regulatory compliance. Key points discussed include the minimum ticket size of 10 lakhs for SM REITs, the maximum cap on investors, and the flexibility in unit sizes.
The role of trustees is safeguarding investor interests and their independence from investment managers. Additionally, it addresses the migration of fractional ownership platforms from LLP structures to comply with SM REIT regulations, highlighting potential challenges and the need for strategic planning.
The conversation also touches on issues such as the conversion of LLPs into companies and the subjective nature of fitting fractional ownership within SM REIT regulations. It concludes with advice for new fractional ownership players to pursue registration before launching and considerations for investors during the subscription process.
Other factors you Should Know About SM REITS
In this summary of SM REITs (Real Estate Investment Trusts) they address investor concerns, regulatory compliance, and the role of SEBI (Securities and Exchange Board of India). Key points covered include the structure and eligibility criteria of SM REITs, the migration process for fractional ownership platforms, the role of trustees in safeguarding investor interests, and the mechanism for handling investor complaints through the SCORES platform.
Additionally, the discussion touches on the absence of specific guidelines for advisors and the importance of minimizing costs while ensuring investor protection.
Conclusion
This discussion on SM REITs (Real Estate Investment Trusts) highlights a significant step forward in regulating fractional ownership opportunities in India. SEBI's introduction of SM REITs on March 8, 2024, sets out clear eligibility criteria, migration requirements, and regulatory oversight to protect investor interests.
Overall, SM REITs offer investors a regulated and transparent avenue for investing in real estate assets, with mechanisms in place to address concerns and ensure compliance.
🕘Timestamps:
0:00 - Introduction
2:30 - What is REIT ?
5:25 - Features of SM REIT and how they impact Investors
7:45 - About the documentation
12:16 - Stakeholders in SM REIT
12:35 - What is AIF ?
17:30 - What happens when you migrate to SM REITS ?
21:38 - Impacts of migration
22:47 - Will all fraction ownership platforms have to migrate ?
25:20 - Eligibility criteria of SM REITS
27:04 - How will you qualify as more than 200 Investors?
32:00 - Current choices for asset managers?
34:48 - What about those who do not qualify?
37:06 - What are trustee and what do they do?
39:30 - What is trustee role in terms of involvement of SM REIT?
44:37 - What happens if not subscribed in 30 days?
47:16 - Guidance about fee structure
51:49 - What happens if investors have complaint?
54:44 - Conclusion
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