One of the regulation-setter and watch dog of capital market and real estate industry Security and Exchange Board of India has prepared a consultation paper consisting of a series of new rules and regulation for the Web based Fractional ownership platforms. These online platforms are offering fractional real estate assets in order to protect the small buyers of share. This norm will help the real estate market to grow at the same time it will safe guard the investors ensuring a secure and corruption free capital market. These assets are recommended to be brought under SEBI’s real estate Investment Trust rules as Small, Micro and Medium Real Estate Investment Trusts.
A great number of fractional ownership platforms have popped out in in past three years which are offering the investors to invest malls, warehouses, buildings and so on. the investment in these platforms varies in between 1 lakh INR to 25 Lakh INR.
These newly formed platforms lack in standard, independent valuation uniform selling, and also they lack in complete information and materials which should be offered to potential investors. This is leading to corruption and fraudulent attacks.
Fractional Investment in real estate market through the Fractional Ownership Platforms (FOP) is a strategy where the total cost of acquisition is divided into several investors who invest through the Special Purpose Vehicle which is prepared by those Fractional Ownership Platforms. Some FOPs are operated and controlled by real estate agents or brokers.
According to the new norm, the Sponsor and investor manager should have acquired at least a net worth of INR 20 million and INR 10 million respectively.
The underlying real estate asset which was offered should be similar to the real estate or property norms dictated under REIT regulation. According to this anyone which has facilitated fractional investment in capital market would require to register with SEBI for operating as MSM REIT.
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