SM REITs- Small and medium real-estate investment trusts

Source– This post on SM REITs- Small and medium real-estate investment trusts has been created based on the article “SM REITs can help investors bet on high-value assets” published in “Economic Times” on 14th March 2024.

Why in the news?

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.

Small and medium real-estate investment trusts SM REITs 

1. About: These are specialised real estate investment trusts that differ from conventional REITs in their scale and focus.

2. Aims: It aims to regulate the fractional ownership industry and safeguard investor interests, incorporating both commercial and residential properties within the new framework.

3. Difference between traditional REITs and SM REITs: Traditional REITs invest in large-scale commercial properties like offices and malls, while SM REITs focus on smaller and medium-sized properties with lower values.

4. It maintains diversified portfolios, spreading risk across different property types within the real estate market.

5. Small and medium real-estate investment trusts may raise funds from Indian and foreign investors by the issuance of units.

6. Criteria:

i) The minimum subscription size for units: 10 lakh is treated as one unit.

ii) To establish this trust, there must be a minimum of 200 unit holders (Not including the investment manager, its related parties, and associates)

iii)  The investment manager responsible for launching an SM REIT must have a net worth of at least ₹20 crore, and a separate trustee will be appointed for oversight.

7. Micro REITs can be listed with asset values ranging from Rs 50 crore to Rs 500 crore.

8. These funds will be utilized for acquiring and managing real estate assets, aiming to generate income for investors.

9. Ownership of these assets will be organized through one or more schemes, each operated under special purpose vehicles (SPVs).

UPSC Syllabus: Economy