Summary:-Small and Medium Real Estate Investment Trusts (SM REITs), introduced by SEBI, are considered riskier than traditional REITs. These REITs, which invest in both commercial and residential properties, are aimed at entities with an asset size between ₹50 crore and ₹500 crore. The government has set a high minimum investment of ₹10 lakhs to ensure that only serious investors with the capacity to bear higher risks participate. SM REITs differ from regular REITs, which focus solely on commercial properties, with a smaller asset size requirement and lower investment thresholds. To register an SM REIT, applicants must apply to SEBI with an initial ₹1 lakh fee, followed by an additional ₹10 lakh fee upon approval. SM REITs must invest 95% of their funds in completed and revenue-generating projects, while the remaining 5% can be used for liquid assets. These trusts are prohibited from lending money, except to Special Purpose Vehicles (SPVs), which also cannot lend funds. SM REITs can raise funds by issuing units to Indian and foreign investors, subject to RBI guidelines, and may undertake leverage, disclosed in the offer document. However, the total borrowing by SM REITs cannot exceed 49% of their scheme assets.
REIT V. SM REIT:-
| Category | REIT | SM REIT |
| Asset Size | ≥500 Cr | 50 Cr – 500 Cr |
| Risk | Less Risky | More Risky |
| Minimum Investment | ₹10,000 – ₹15,000 | ₹10 Lakhs |
| Investment Type | Commercial Property | Commercial & Residential Property |
How to register a Small and Medium REIT (SM REIT ):-
1. Make application to SEBI:-
The applicant must submit an application to SEBI along with a non refundable fee of ₹1Lakh.
2. SEBI intimation:-
SEBI will review the application and inform the applicant weather the registration will be granted or not
3. Further Fees upon Approval:-
If SEBI decide to grant registration, the applicant must pay an additional non refundable fee of ₹10lakh within 15days of receiving SEBI intimation.
Investment Conditions by SM REIT:-
| 95% of Funds | Remaining 5% |
| Must be invested in completed & revenue generating projects | can be invested in liquid asset |
Note:- SM REIT is not allowed to lend money except to SPVs (Special Purpose Vehicles), and SPVs are further prohibited from lending money.
Modes of Fund raising by SM REIT:
1. SM REIT can issue units to both Indian and foreign investors. (investment by foreign investors shall be subject to the guidelines as may be specified by Reserve Bank of India)
2. SM REIT may undertake leverage but must disclose it in the offer document.
3. Modes of fund-raising by the SPV of SM REIT:
(a) Equity investment
(b) Borrowing
4. The total borrowing by SM REIT shall not exceed 49% of the value of the scheme assets.
note :-
“Special purpose vehicle” or SPV means any company which is wholly owned subsidiary of the scheme of the SM REIT and the SPV shall not have any other capital or ownership intrest in it.
Refrance:-
SEBI (Real Estate Investment Trust)2014
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