Fractional ownership platforms give suggestions to Sebi, Real Estate News, ET RealEstate

June 23, 2023

Allowing investments in under construction assets, reducing experience requirements for a developer or fund manager, allowing more time to existing fractional ownership platforms to migrate to the proposed structure, and exempting luxury residential properties from the rule are some of the suggestions operators of fractional property-ownership platforms have made to the Securities and Exchange Board of India (Sebi).

Sebi has proposed to regulate all online platforms that offer fractional ownership of real estate assets.

“The ceiling to invest in non-completed/non-rent generating properties should be increased since investors aim for total return on investment comprising rental yields as well as value appreciation,” said Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE. “Increasing this ceiling of investment will give the investors an opportunity to earn better returns as asset value enhances with assets getting completed and matured.” The proposal forbids raising of debt by MSM REITs, which is likely to hamper their ability to generate better returns as debt brings certain tax efficiency and improves returns on equity.

Industry experts said that efforts be made to keep an optimal level of leverage so that the product becomes commercially viable. Yours and Equity Address, which offer fractional ownership of holiday homes, and Strata, which offers fractional ownership of office space and warehouses, are among property consultants that have submitted their suggestions to Sebi.

Strata said that bringing fractional ownership platforms under regulatory perimeter will ensure that investors benefit from good corporate governance and transparency. “While the requirement of sponsors having experience as a developer/fund management for a minimum of 5 years is set, this will discount a lot of players due to the novelty of this industry in India. Sebi may consider granting a longer transition period due to the complexities of existing and new structure,” Strata has said. Shravan Gupta, co-founder and CEO, Yours, said that the firm’s suggestion to Sebi would be to exclude residential and luxury residential assets from the ambit of MSM REIT regulations.

Second Homes & RoI
“Owning second homes on fractional ownership need not always have a ROI model. It has to be understood that luxury residential homes are not meant for public usage, it has a tag of privileged usage for its owners,” the company has said in the suggestion submitted to Sebi.

The platforms have suggested the clause requiring sponsors to have at least five years of experience in the real estate industry as either a developer or a fund manager be broadened.

  • Published On Jun 12, 2023 at 09:20 AM IST

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