Revolutionizing Real Estate Investment in India: The Rise of Small and Medium REITs
KPMG and CREDAI unveil a report on the potential of Small and Medium Real Estate Investment Trusts (SM REITs) in India, democratizing access to high-value properties and reshaping the investment landscape.
Sm ReitsReal Estate InvestmentFractional OwnershipKpmgCredaiSebiReal Estate NewsJul 18, 2024
The Securities and Exchange Board of India (SEBI) has introduced amended regulations for SM REITs, opening the door for retail investors to participate in high-value real estate assets with a minimum investment of Rs 10 lakh. This initiative enables a diverse group of investors to collectively own units of premium properties, providing access to real estate assets.
The rise of SM REITs is expected to create a ripple effect across the real estate industry, offering developers an efficient exit strategy and enabling reinvestment of capital into new ventures. This, in turn, will foster sustained growth in the sector, which is one of the largest employers in the country. Additionally, the increased liquidity and flexibility offered by SM REITs enhance the attractiveness of real estate as an investment class, potentially leading to healthier returns.
However, the report also highlights the inherent challenges and risks associated with fractional ownership, including liquidity concerns, a somewhat less favorable tax regime compared to regular equity investments, and the need for consensus among co-owners. SEBI's regulatory framework aims to safeguard investor interests and bolster confidence.
Driven by the rising demand for residential and commercial real estate, the anticipated surge in demand is expected to unlock opportunities for a broader spectrum of investors, driving growth, and fostering innovation in the real estate sector.
Chintan Patel, partner – deal advisory and head – building, construction and real estate, KPMG India, emphasized the need for thoughtful deliberation and robust regulatory oversight to navigate the complexities of fractional ownership.
Boman R Irani, president, CREDAI, highlighted the Indian office market's resilience and strong performance, attributing it to the rising popularity of co-working spaces and fractional ownership opportunities in India.
As the real estate sector continues to evolve, the synergy between innovative investment platforms and regulatory frameworks will be crucial in shaping a dynamic and resilient real estate market.
Frequently Asked Questions
What is the minimum investment required for SM REITs?
Rs 10 lakh
What is the aim of SEBI's regulatory framework for SM REITs?
To safeguard investor interests and bolster confidence
What is the potential impact of SM REITs on the real estate industry?
To create a ripple effect across the industry, offering developers an efficient exit strategy and enabling reinvestment of capital into new ventures
What are the inherent challenges and risks associated with fractional ownership?
Liquidity concerns, a somewhat less favorable tax regime, and the need for consensus among co-owners
What is the expected outcome of the rise of SM REITs on the real estate sector?
To unlock opportunities for a broader spectrum of investors, driving growth, and fostering innovation in the sector
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