SEBI To Regulate Fractional Ownership Platforms Offering Realty Assets
Fractional ownership of realty assets is proposed to be brought under SEBI (Real Estate Investment Trusts) Regulations, it said.
The Securities and Exchange Board of India has proposed to regulate platforms offering fractional ownership of real estate assets to safeguard the interests of investors.
In the past two to three years, certain platforms have been offering fractional ownership of real estate assets, providing investors with the option to invest in buildings and office spaces.
Such fractional ownership of real estate assets is proposed to be brought under MSM REITs under the SEBI (Real Estate Investment Trusts) Regulations, 2014, the markets regulator said in a consultation paper on the regulatory framework for micro, small, and medium real estate investment trusts.
"Given the increasing value of investments with such fractional ownership platforms as well as the rising number of investors, it has become necessary to consider whether it is an appropriate juncture to require registration and regulate these FOPs in order to bring about, inter alia, regulatory oversight, common uniform standard disclosure practices, ensuring liquidity by way of listing or similar such measure, investor redressal mechanisms, etc. to safeguard the interests of investors," SEBI said.
The lack of standard, uniform selling practices and a lack of independent valuation or diligence in the information or materials provided to potential investors could result in investors falling prey to misselling, it said.
How Fractional Ownership Of Real Estate Assets Works
Investment in real estate is capital-intensive and requires an investor to put in huge amounts of money, which can make it quite difficult for the majority of non-institutional investors to invest in such properties.
Fractional ownership allows investors to own a certain percentage or fractional share of the real estate asset through the securities issued by the special purpose vehicles. The minimum investment typically ranges between Rs 10 lakh and Rs 25 lakh.
FOPs facilitate investment in primarily pre-leased real estate, and the returns generated are distributed to the investors subject to management, maintenance fees, and other charges.
"Extending the regulatory framework of REIT regulations to fractional ownership platforms would address the above-mentioned concerns to a large extent and also provide an impetus for the growth of this market," said SEBI.
