Fractional Ownership Platforms
Small and Medium REITs foster growth and transparency in India
- Samantak Das
- Rohan Sharma
- Ankit Bhartiya
The transformation of India’s real estate sector has been driven by a confluence of factors, with technological advancements, a maturing investment landscape and regulatory reforms like RERA and GST playing a pivotal role. Moreover, the emergence of Real Estate Investment Trusts (REITs) and more recently, Fractional Ownership Platforms (FOPs) have democratized access to real estate for retail investors. Over the past few years, web-based platforms offering fractional ownership of real estate assets have proliferated, attracting a growing number of investors. However, a critical aspect remained unaddressed – regulatory oversight.
SM REIT regulations are a timely intervention
To formalize the nascent fractional ownership space, the Securities and Exchange Board of India (SEBI) notified Small and Medium Real Estate Investment Trusts (SM REITs) through amendments made to the already existing REIT regulations. Under the SM REIT regulations, the FOPs will now have higher compliance requirements related to issue size, asset exposure, investment portfolio, number of subscribers and minimum investment size. Also, such offerings now need to be listed on public exchanges and adhere to regular reporting and governance standards. As a result, regulatory oversight is anticipated to inject greater market participation from domestic as well as foreign retail investors, ultimately increasing liquidity in the Indian real estate market.
A market with immense growth potential
The current fractional ownership market is estimated at ~USD 500 million based on value of assets under management. However, our analysis reveals significant prospects for growth. More than 328 mn sq ft of grade A office assets in the top seven cities of India, valued at ~USD 48 billion are MSM REIT-worthy. This illuminates the promise and potential of this sector's burgeoning future. As the regulatory framework falls into place and FOPs overcome initial implementation obstacles, we expect the MSME REIT market to experience an even more accelerated pace of growth - the market is poised to grow and potentially surpass USD 5.0 billion of AUM by 2030.
To find out more about the evolving landscape of fractional ownership in India, download our report.
