SEBI Introduces Amendments to Regulations for Small and Medium REITs

NEW DELHI: The Securities and Exchange Board of India (SEBI) has enacted amendments to regulations governing small and medium Real Estate Investment Trusts (SM REITs) under the Securities and Exchange Board of India (Real Estate Investment Trusts) (Amendment) Regulations, 2024.

These amendments, applicable to the 2014 regulations, are set to take effect upon their publication in the official gazette.

A Real Estate Investment Trust (REIT) is defined as an entity that pools a minimum of Rs 50 crore for issuing units to at least 200 investors, with the objective of acquiring and managing real estate assets or properties. This allows investors to receive income generated from these assets without assuming day-to-day management control.

Key provisions include the requirement for the investment manager to possess a net worth of no less than Rs 20 crore and a minimum of two years’ experience in the real estate industry or real estate fund management. Additionally, at least half of the investment manager’s directors must be independent, with no ties to other REITs or SM REITs.

To safeguard investor interests, the board reserves the right to appoint an individual to oversee the records and documents of the SM REIT. Moreover, each SM REIT scheme must have a distinct name, free from any misleading implications regarding guaranteed returns.

Under these amendments, SM REITs must ensure that assets proposed for acquisition are valued between Rs 50 crore and Rs 500 crore, with a minimum of 200 unitholders, excluding the investment manager and its associates. Furthermore, at least 25 percent of outstanding units in each scheme must be offered and allotted to the public.

SM REITs are prohibited from engaging in transactions with related parties, including facility and property management arrangements. Investment conditions mandate that the Special Purpose Vehicle (SPV) exclusively own all assets acquired or proposed by the scheme, with at least 95 percent of the scheme’s assets invested in completed and revenue-generating properties.

These amendments aim to streamline operations and enhance transparency within the SM REIT sector, ensuring adherence to stringent investment criteria and governance standards.

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