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India's SEBI to regulate platforms offering fractional ownership of real estate assets

May 15, 2023 00:00:00

NEW DELHI, May 14 (Reuters): The Securities and Exchange Board of India (SEBI) has proposed regulating all online platform that offer fractional ownership of real estate assets, in a bid to provide protection to small investors.

Fractional ownership typically refers to small investment holdings of real estate assets. A number of web based platforms have mushroomed in the past three years which allow investors to invest in malls, warehouses, buildings and so forth.

The minimum investment on these platforms typically range from 100,000 rupees 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 nation's market regulator, in the discussion paper late on Friday.

A discussion paper is normally the first step ahead of formulating new rules by SEBI.

The regulator proposed that such platforms must be registered under Regulatory Framework for Micro, Small and Medium REITs, where it should have separate trustees, sponsors and investment managers.

The sponsor and investment manager should have a net worth of 20 million rupees and 10 million rupees, respectively, the regulator said.

The underlying real estate assets offered on these platforms are similar to the real estate or property defined under the REIT Regulations, said SEBI in the discussion paper.

Globally such fractional ownership has been in existence since 2015 in markets such as the United States and United Arab Emirates.

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