NEW DELHI: The securities and exchange board of India (SEBI) has amended the regulations applicable to small and medium REITs (SM REITs) under Securities and Exchange Board of India (Real Estate Investment Trusts) (Amendment) Regulations, 2024.
The amendments has been made to 2014 regulations and will come into force on the date of their publication in the official gazette.
Real Estate Investment Trust (REIT) means a person that pools Rs 50 crore or more for the purpose of issuing units to at least 200 investors so as to acquire and manage real estate asset(s) or property(ies), that would entitle such investors to receive the income generated therefrom without giving them the day-to-day control over the management and operation of such real estate asset(s) or property(ies).
Investment manager
An application for grant of certificate of registration as SM REIT must be made by the investment manager on behalf of the Trust. The investment manager has a net worth of not less than Rs 20 crore. The investment manager should have at least two years’ experience in the real estate industry or real estate fund management.
Not less than half of the directors of the investment manager should be independent and should not be directors of the manager or investment manager of another REIT or SM REIT.
The trustee should not be an associate of the investment manager.
The investment manager will identify the real estate assets or properties it proposes to acquire or provide the features of the real estate assets or properties including location or such other details for the particular scheme in the draft scheme offer document. The minimum price of each unit of the scheme of the SM REIT shall be Rs 10 lakh.
The board may, in order to protect the interests of investors, appoint any person to take charge of records, documents of the SM REIT.
No unit holder of the scheme of the SM REIT enjoys superior voting or any other rights over another unit holder in the same scheme and there are no multiple classes of units of scheme of the SM REIT.
If the SM REIT fails to make an initial offer of a scheme within three years from the date of registration with the Board, it shall surrender its certificate of registration to the Board and cease to operate as an SM REIT.
Each scheme of the SM REIT shall be identified by a separate name, which shall not be misleading and shall not portray any guaranteed returns to the investors.
No offer of units by a scheme of the SM REIT shall be made unless the size of the asset proposed to be acquired in a scheme of the SM REIT is at least Rs 50 crore and less than Rs 500 crore and the minimum number of unitholders of the scheme of the SM REIT other than the investment manager, its related parties and associates of the SM REIT are not less than 200 investors.SEBI
The minimum offer and allotment to the public in each scheme of SM REIT shall be at least 25 per cent. of the total outstanding units of such scheme.
The SM REITs shall not enter into any transaction with related parties including transactions for facility management and property management.
Investment conditions
The SPV shall directly and solely own all assets that are acquired or proposed to be acquired by the scheme of the SM REIT, of which SPV is the wholly owned subsidiary.
The scheme of the SM REIT shall invest at least 95 per cent. of the value of the schemes’ assets for each of its schemes in completed and revenue generating properties and shall not invest in under-construction or non-revenue generating real estate assets.
The SPV shall raise capital only from equity investment from the scheme of SM REIT. The SPV may raise funds by way of borrowings from the scheme of SM REIT.
