A new way to invest in commercial real estate

SM REIT stands for Small and Medium Real Estate Investment Trusts and they are a subclass within the REIT framework that provides access to individual investors to rent yielding real estate like office buildings, retail malls, hotels, hospitals etc. that are valued between Rs. 50 and 500 crores. Similar to REITs, SM REIT units will also be traded on the stock exchange and are regulated by the Securities and Exchange Board of India (SEBI).

SEBI introduced the SM REIT regulations with the objective of making smaller real estate assets valued between Rs. 50-500 crores more accessible to the retail and institutional investors. Mainboard REITs are only allowed to list assets over Rs. 500 crores but there exists a significant market of rent yielding assets valued less than 500 crores that can also be monetized through a listed and regulated trust vehicle on the same lines as mainboard REITs. The SM REIT regulations also helped bring the existing fractional ownership platforms within the regulatory ambit.

The minimum investment shall be in units of Rs 10 lakh and additional investments would be in multiples of Rs 10 lakhs.

An SM REIT will come out with an initial public offering for every new scheme and the process of investing is therefore the same as investing in an IPO. You can subscribe to the listing directly via your demat account and can also purchase units of previously listed SM REIT schemes from the stock exchange. Further, please note that this is subject to further guidance, circulars or notifications to be issued by the SEBI and stock exchanges.

The investment manager selects, acquires, manages and sells the assets for all schemes.

The investment manager charges a fee in terms of the investment management agreement executed amongst the Trustee and the Investment Manager . The details of the fee are provided in the offer document and on the website of the investment manager.

There are risks to investing in an SM REIT, amongst others - vacancy risk and exit risk. Vacancy risk is the risk that the tenant in the asset will vacate the property prior to the culmination of the tenancy in the future at which point the asset will need to be re-leased, which may lead to a temporary loss of income. Exit risk is the risk that that asset may take a longer period to sell than expected, especially in cyclical market conditions.