SEBI notifies Micro REIT Regulations. Moves to enhance transparency and investment

MUMBAI/BENGALURU: The Securities and Exchange Board of India (Sebi) on Friday announced rules applicable to small and medium-sized real estate investment trusts (SM-REITs) for income-generating and completed properties that may include commercial properties, rental homes, warehouses, warehouses, etc. notified. and hotels among others.

The introduction of the regulations is set to strengthen investor confidence and expand inclusion of this growing asset category. These efforts are expected to provide critical support to real estate developers, creating additional opportunities to leverage their assets and inject vital liquidity into the industry.

While most of the regulations are consistent with draft guidance published in November, the capital markets regulator has introduced some additional measures related to leverage, minimum subscribers and higher capital requirements for investment managers of SM-REITs.

“The new regulations are progressive and have the potential to transform the income-generating asset market in India. With stringent governance criteria, eligibility criteria, minimum capital requirement of Rs 20 crore for investment managers and 5% commitment for all SM REITs, we hope this alternative asset class will receive a strong response from investors,” said Anuranjan, MD, Lumos. Mohnot said. Alternative investment advisor.

The minimum subscription size for MSM REIT Scheme units is Rs 10 lakh and they are treated as one unit. Micro REITs can be listed with an asset value of at least Rs 50 crore and up to Rs 500 crore. SM REITs will also be able to create a separate system to own real estate assets through a special purpose company comprised of companies.

“These regulations protect the interests of both investors and service providers. As a vacation home fractional ownership platform, by including the residential sector along with the commercial sector in these regulations, we are ensuring ease of exit for investors and complete transparency,” said Saurabh Vohara, Founder and CEO, ALYF. According to him, the regulations will help open up the new asset class of holiday homes to a wider audience and change the way Indians own and profit from real estate investments. According to the regulations, the minimum number of unit holders in an SM REIT scheme, other than the investment manager, are as follows: SM REIT’s related parties and related parties are expected to consist of more than 200 investors.

As per regulations, these micro REITs can leverage up to 49% of the scheme’s asset value. Additionally, if not utilizing SM REIT, the investment manager must hold at least 5% of the total outstanding units at all times. In the case of leveraged SM REIT, the investment manager must own 15% of the shares.

SM REIT’s plan is not permitted to lend to any entity other than its own special purpose company, and this SPV is also not permitted to lend to any entity.

The regulations stipulate that funds must be raised only through the book-building process of a designated stock exchange and that listing is mandatory. Funding can be raised from domestic and foreign investors.