New SEBI Rules for Small and Medium REITs to Boost Investor Confidence: CRISIL Ratings
The Securities and Exchange Board of India (SEBI) has introduced new regulations for small and medium real estate investment trusts (SM REITs) to enhance investor protection and broaden the investor base. According to CRISIL Ratings, these regulations will drive interest in fractional ownership of real estate assets.
Key Measures
Some of the key regulatory measures include:
- Mandatory investments in operational assets
- Restrictions on related party transactions
- Compulsory listing on the stock exchange
Mohit Makhija, Senior Director at CRISIL Ratings, stated that these regulations should inspire investor confidence by protecting them against two key risks. First, project completion and leasing risks will be mitigated as investments cannot be made in under-construction assets. Second, the risk of fund diversion is expected to be reduced due to the ring-fencing of cash flows and mandatory distribution of funds every quarter.
Additionally, the regulations should improve transparency and governance. Other SEBI regulations include the need for at least 200 retail investors, which will provide liquidity. According to CRISIL Ratings, SM REITs target a distinct and differentiated market compared to conventional REITs.
