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Real estate investing: A new era begins with SM REITs

28 November 20234 mins read by Angel One
Sebi has approved a new regulatory framework for small and medium REITs (SM REITs). SM REITs have a lower asset value than traditional REITs, making them more accessible to a wider range of investors.
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What are REITs?

Real Estate Investment Trusts (REITs) own and operate income-producing real estate. They offer investors an opportunity to invest in real estate without having to buy, manage, or finance individual properties. REITs are listed on stock exchanges and trade like stocks.

What are Small and Medium REITs (SM REITs)?

SM REITs are a new type of REIT that has been created by the Securities and Exchange Board of India (Sebi). SM REITs have a smaller asset value than traditional REITs, with a minimum asset value of Rs 50 crore versus the current minimum asset value of Rs 500 crore for existing REITs.

What are the benefits of SM REITs?

SM REITs offer a number of benefits to investors, including:

  • Lower investment minimums: SM REITs have a lower investment minimum than traditional REITs, making them more accessible to a wider range of investors.
  • Diversification: SM REITs can invest in a wider range of real estate assets than traditional REITs, which can help to diversify an investor’s portfolio.
  • Liquidity: SM REITs are expected to be more liquid than traditional REITs, making it easier for investors to buy and sell their units.

What are the risks of SM REITs?

SM REITs are also subject to a number of risks, including:

  • Smaller size: SM REITs are smaller than traditional REITs, which can make them more volatile.
  • Limited track record: SM REITs are a new type of investment, so there is a limited track record to assess their performance.
  • Higher fees: SM REITs may have higher fees than traditional REITs to cover their smaller size and higher expenses.

Sebi’s new regulatory framework for SM REITs

Sebi has approved a new regulatory framework for SM REITs that is designed to protect investors and promote the development of the SM REIT market. The new framework includes the following provisions:

  • Minimum asset value: SM REITs must have a minimum asset value of Rs 50 crore.
  • Investment manager: SM REITs must be managed by a Sebi-registered investment manager.
  • Distribution: SM REITs must distribute at least 90% of their taxable income to their unit holders.
  • Valuation: SM REITs must be valued by an independent valuer.

Insights

The new regulatory framework for SM REITs is a positive development that is likely to boost the growth of the SM REIT market. SM REITs offer a number of potential benefits to investors, including lower investment minimums, diversification, and liquidity. However, investors should also be aware of the risks associated with SM REITs, such as their smaller size, limited track record, and higher fees.

Overall, the new regulatory framework is a good step forward for the development of the SM REIT market. However, it is important to remember that SM REITs are a new type of investment and there is a limited track record to assess their performance. Investors should carefully consider their investment objectives and risk tolerance before investing in SM REITs.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.

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