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In a move to simplify the regulatory framework and boost participation in Small and Medium Real Estate Investment Trusts (SM REITs), SEBI has introduced standardised disclosures and streamlined public issue norms. The draft scheme offer document will now be split into two parts Key Information of the Trust (KIT) and Key Information of the Scheme (KIS). The regulator has also made it mandatory for SM REITs to make public offers within a year of receiving observations and clarified rules regarding minimum subscription thresholds. These changes follow SEBI's broader push to increase accessibility in real estate investments.
In a bid to improve the ease of doing business for Small and Medium Real Estate Investment Trusts (SM REITs), the Securities and Exchange Board of India (SEBI) has rolled out new measures aimed at simplifying the public issue process and enhancing disclosure practices. Advertisement
As per a notification issued earlier this week, SEBI has revised the format of the scheme offer document for SM REITs by dividing it into two distinct sections. The first is the Key Information of the Trust (KIT), which includes details about the SM REIT, its investment manager, trustee, and structural framework. The second is the Key Information of the Scheme (KIS), which focuses on individual scheme specifics, including the assets under consideration.
For the initial scheme of an SM REIT, both KIT and KIS will need to be submitted together for SEBI's review. However, for any schemes filed thereafter, only the KIS must be submitted for review, while the KIT will be maintained for record-keeping purposes. SEBI has mandated that any material alterations in the KIT must be disclosed via an addendum on the SM REIT's official website and reported to both SEBI and the stock exchanges within a week.
To ensure transparency and regular updates, the investment manager is required to update the KIT every six months. The revised KIT must be published on the SM REIT?s website and submitted to SEBI and stock exchanges within 30 days from the end of each half-year.
In relation to public issue processes, SEBI stated that the existing REIT guidelines would be extended to SM REITs, albeit with a few exceptions. It clarified that SM REITs are only permitted to launch their initial unit offerings through public issues. Such offers must be made within a year from the date of SEBI's observations; otherwise, a fresh draft of the scheme offer document must be filed.
SEBI has also clarified the norms for minimum subscription levels. For schemes that opt to utilise leverage as permitted by the regulations, the minimum subscription must be at least 90 per cent of the fresh issue size mentioned in the KIS. For schemes that do not use leverage, the minimum subscription is set at 100 per cent of the issue size.
These amendments were formalised through changes to the Small and Medium Real Estate Investment Trusts (SM REITs) Rules.
Notably, SM REITs were introduced in March last year as part of SEBI's ongoing efforts to encourage broader retail and institutional participation in the real estate sector. These trusts are structured similarly to traditional REITs but operate on a more compact scale, with a minimum asset threshold of INR 50 crore, compared to the INR 500 crore requirement for regular REITs.
SM REITs are allowed to form special purpose vehicles (SPVs) to manage their properties. They must allocate at least 95 per cent of their total assets to completed and revenue-generating projects. Additionally, they are obligated to distribute 95 per cent of their net distributable income to investors on a quarterly basis a regulation in line with existing REIT norms.
The move not only supports emerging players in the property investment space but also complements the regulator's wider agenda of broadening access to real estate markets. As real estate fractionalisation gains traction, SM REITs could become a key channel for diversifying portfolios and enhancing investor participation.
Source: PTI
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