This explainer series on SM REITs is brought to you by Property Share, where we break down everything you need to know about SM REITs—making real estate investment simple and accessible. Explore the various sections to learn about the fundamentals of SM REITs, their unique benefits and potential risks, how they are different from regular REITs, how to invest and how to evaluate them, along with their taxation norms.
This explainer series is also available in the form of a video.
What are REITs?
A Real Estate Investment Trust (REIT) is a company that owns and manages income-generating properties. Investors can buy shares and earn returns through rent and property appreciation.
What makes SM REITs different?
While Regular REITs invest in large-scale properties and trade like stocks, SM REITs focus on small to mid-sized assets and offer a more direct, property-linked investment model.
How Do SM REITs Work?
SM REITs pool investor funds into Special Purpose Vehicles (SPVs) that directly own the properties. Investors receive units in specific property schemes, giving them direct exposure to real estate performance.
What are the key differences between regular REITs and SM REITs?
| Aspect | SM REITs | Regular REITs |
|---|---|---|
| Size | Rs. 50 crores - 500 crores | > Rs. 500 crores |
| Choice of assets | Yes | No |
| Investment strategy | Focused single asset approach | Portfolio of multiple assets |
| Type of assets | 100% leased | Leased, under construction & land |
| Under construction assets | Not permitted | Up to 20% of the value of REIT is permitted |
| Listed | Yes | Yes |
| Hold period | 4-6 years | Long-term |
| Minimum trading lot | Rs. 10 lakhs | One unit |
| Related Party Transactions | Not allowed | Allowed |
Which One is Right for You?
Both REITs and SM REITs offer investors the opportunity to invest in commercial real estate, but they differ in key areas such as the size of the properties, investment amounts, investor control, and risk profiles. However, if you want direct exposure to specific high-quality properties, SM REITs offer a transparent and structured approach. Ultimately, the choice between REITs and SM REITs will depend on an investor's risk tolerance, investment goals, and preference for control over their real estate investments.