Exploring SM REITs: A New Frontier in Real Estate Investment
SEBI has introduced Small and Medium Real Estate Investment Trusts (SM REITs), targeting properties valued between Rs.50 crore and Rs.500 crore. This initiative aims to broaden investor access to real estate by enabling fractional ownership through regulated schemes.
Sm ReitsReal EstateInvestmentSebiFractional OwnershipReal Estate NewsSep 08, 2025
REITs in India have primarily focused on large, commercial assets with a minimum size of Rs.500 crore. In contrast, SM REITs can hold both commercial and residential real estate properties in the Rs.50–500 crore range. The structure also differs. Conventional REITs work as a single pool of assets, where investors hold a proportional stake in the portfolio. SM REITs, however, allow a single entity to launch multiple schemes, similar to mutual funds. Each scheme holds different assets, and individuals invest in the scheme they choose, keeping ownership interests separate.
Like regular REITs, SM REIT units must be listed on the stock exchanges. However, the minimum ticket size is Rs.10 lakh for a single unit, as opposed to Rs.10,000-15,000 in conventional REITs. Once funds are collected, they are routed through a special purpose vehicle (SPV), which manages rental income or proceeds from property sales. Regulations prohibit SM REITs from investing in under-construction projects or land, limiting them to completed, revenue-generating assets. They must also distribute 95% of their earnings to unit holders. In addition, any remaining net cash flow has to be paid out in full on a quarterly basis.
This route opens up access to premium and big real estate by allowing smaller, more focused investments. Investors can choose schemes aligned with specific cities or micro-markets and benefit from regulated ownership. For the realty sector, SM REITs are likely to improve liquidity and attract wider institutional participation in fractional ownership.
Despite the promise, SM REITs remain new and largely untested. So far, only PropShare Investment Trust has launched two schemes, meaning there is little track record for investors to rely on. The risks are also similar to conventional REITs—low occupancy, tenant defaults, and valuation uncertainties remain key concerns. As the market develops, the success of SM REITs will depend on how quickly investors adapt to this structure and whether the promised transparency translates into sustained confidence.
Frequently Asked Questions
What is the minimum investment required for SM REITs?
The minimum investment required for SM REITs is Rs.10 lakh for a single unit.
What types of properties can SM REITs hold?
SM REITs can hold both commercial and residential real estate properties valued between Rs.50 crore and Rs.500 crore.
How do SM REITs differ from conventional REITs?
SM REITs allow a single entity to launch multiple schemes, each holding different assets, while conventional REITs work as a single pool of assets.
What are the key benefits of investing in SM REITs?
Key benefits include lower investment barriers, regulated ownership, and the ability to choose schemes aligned with specific cities or micro-markets.
What are the main risks associated with SM REITs?
The main risks include low occupancy, tenant defaults, and valuation uncertainties, similar to conventional REITs.
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