SEBI Proposes Regulation Of Online Platforms Offering Fractional Ownership Of Real Estate Assets

The Securities and Exchange Board of India (SEBI) has proposed regulating all online platforms that offer fractional ownership of real estate assets to protect small investors.

Small investment interests of real estate assets are sometimes referred to as fractional ownership. In the last three years, a number of websites have sprung up that let investors invest in buildings, warehouses, shopping centres, and other real estate.

The minimum investment on these sites often ranges from 100,000 to 250,000 rupees.

"The lack of standard, uniform selling practices and lack of independent valuation, or of diligence of information or materials provided to potential investors could result in investors falling prey to mis-selling," said SEBI, the country's market regulator, published the discussion paper late on Friday.

The initial phase in the SEBI rulemaking process often involves a discussion paper.

The regulatory body suggested that these platforms register under the Regulatory Framework for Micro, Small, and Medium REITs, where they would need to have independent trustees, sponsors, and investment managers.

The regulator stipulated that the net worth requirements for the sponsor and investment manager should be 20 million and 10 million rupees, respectively.

The underlying real estate assets offered on these platforms are comparable to the real estate or property covered by the REIT Regulations, according to SEBI's discussion paper.

Such fractional ownership has been available in markets like the United States and United Arab Emirates since 2015.