Navigating the SM REIT Landscape - A Look at Regulations and Implications

The Securities and Exchange Board of India (SEBI) notified in March 2024 the regulations governing Small and Medium Real Estate Investment Trusts (SM REITs) to establish a well-defined regulatory framework for the Fractional Ownership Platforms (FOPs). These FOPs are investment vehicles wherein a pool of investors invest in securities such as equities, compulsory convertible debentures, etc., issued by special purpose vehicles (SPVs), which purchase or own real estate assets on a fractional or an undivided ownership basis.

SEBI introduced the SM REIT framework against the backdrop of India’s REITs and infrastructure investment trusts (InvITs) demonstrating sustained growth, as evidenced by their cumulative mobilisation of INR 1.3 trillion between FY2019-20 and March 2024, according to Reserve Bank of India data.

CBRE Research estimates that the potential market for SM REITs in India covers over 300 million sq. ft. of completed commercial office space, besides an additional 50 million sq. ft. of space expected to be completed by 2026. This translates into an estimated market size of over USD 60 billion*.

This report aims to discuss:

• The major features of SM REITs
• The key differences between traditional and SM REITs
• The implications of these differences
• The critical takeaways of SM REIT regulations
• The potential impact of SM REITs on the real estate fractional ownership in India
• Value proposition for key stakeholders — developers, unitholders, and lenders

Please click on download to get a deeper understanding of India’s evolving SM REIT landscape.

*Note: The above analysis pertains to mid-sized (0.1 – 1 million sq. ft.), investment-grade office developments in India’s top 7 cities as of Q2 2024 and excludes institutional projects. Additionally, due to significant variations in development quality, and city / micro-market dynamics, the indicated values may differ from actual values.