SEBI's new framework for small and medium REITs: How real estate investors benefit?

Currently, India has only three REIT funds - Embassy Office Parks REIT, Mindspace Business Parks REIT, and Brookfield India Real Estate Trust.

Shiv Parekh, Founder of hBits, sees this regulatory change as a game-changer.

Speaking to CNBC-TV18 he said, “Historically, these have been restricted to institutional investors or ultra HNIs to own because asset values are ranged from ₹50 crore to ₹1000 crore. So, here with a much smaller ticket size, investors are able to get access to this asset class and make the returns associated with owning the asset class.”

The SEBI regulation not only reduces the minimum asset threshold but also proposes a minimum ticket size of ₹10 lakh.

“SEBI, for instance, has proposed a minimum ticket size of ₹10 lakh. The minimum ticket size will reduce further as we go along," Parekh said.

Avinash Rao, Founder of Alt Realtech, sheds light on the benefits of tokenisation.

He said, "Real estate assets are often challenging to buy and even harder to sell due to their substantial value. Tokenisation makes the bite size smaller, facilitating easier transactions. As the bite sizes decrease, we can expect a flourishing secondary market for these assets."

Rao envisions a future where people can own a fraction of a commercial or residential real estate asset, ultimately being able to transact at a per square foot rate.

When it comes to taxation, Rao emphasises the need for clarity. While REITs have clear tax guidelines, the evolving landscape of digital assets and fractional ownership requires further understanding.

Rao remains optimistic, stating, "There is no reason to believe it should be any different from how REITs are taxed."