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SEBI has introduced a new investment option for investors called Small and Medium Real Estate Investment Trusts (SM REITs).
SM REITs are allowed to issue their units with asset value of at least Rs.50 crore. For existing REITs, such a limit is Rs. 500 crore. SM REITs should have at least 200 investors to start a fund. These REITs will have a minimum ticket size of Rs.10 lakh.
These funds will come with lock in period of at least 3 years.
In terms of yield, SM REITs will have to distribute cash flow every quarter within the first 15 days of the end of the quarter. Also, such a payment has to be made within 7 working days of declaration.
SEBI clarified that 95% of the total net distributable cash flows of the Special Purpose Vehicle (SPV) has to be distributed to SM REITs. Further, the scheme has to distribute 100% of its distributable cash flows to unit holders.
With this, companies offering units of fractional commercial real estate can become SM REITs. These products give investors fractional ownership in commercial properties like offices, retail properties, warehouses, data centres and industries. Individuals and other legal entities like HUF, trusts, companies etc can invest in these products.
Companies offering SM REITs will have to maintain networth of Rs.20 crore with half of it in the form of liquid cash.
Also, the company will have to have 2 years of experience in real estate fund management to float SM REIT.