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SEBI Proposes Regulating Online Platforms Offering Fractional Ownership of Real Estate Assets

By Rishabh Chamoli | 2023-05-15

SEBI, the market regulator in India, has put forward a proposal to regulate all online platforms that offer fractional ownership of real estate assets. This move aims to provide protection to small investors.

Fractional ownership involves small investment holdings of real estate assets, and over the past three years, several web based platforms have emerged, allowing investors to invest in warehouses, malls, buildings, and more. The minimum investment required for these platforms is typically between 100,000 and 250,000 rupees.

SEBI has expressed concern about the lack of standard, uniform selling practices and the absence of independent valuation or diligence of information or materials provided to potential investors, which could lead to mis selling.

In the discussion paper published on Friday, SEBI proposed that these platforms should be registered under the Regulatory Framework for Micro, Small and Medium REITs, which requires separate sponsors, trustees, and investment managers. The regulator has set a net worth requirement of 20 million rupees for the sponsor and 10 million rupees for the investment manager.

According to SEBI, the underlying real estate assets offered on these platforms are similar to the real estate or property defined under the REIT Regulations. Fractional ownership has been in existence globally since 2015 in markets such as the United States and the United Arab Emirates. This discussion paper is the first step towards the formulation of new rules by SEBI.