Fractional property-ownership platforms propose regulatory amendments to SEBI

Several operators of fractional property-ownership platforms have provided suggestions to the Securities and Exchange Board of India (SEBI) regarding the regulation of online platforms that offer fractional ownership of real estate assets. One of the proposals is to allow investments in under construction assets, as well as reducing the experience requirements for developers or fund managers. Additionally, operators are requesting more time for existing fractional ownership platforms to transition to the proposed regulatory structure. Another suggestion put forth is to exempt luxury residential properties from the regulations.

By increasing the investment ceiling, investors will have the opportunity to earn better returns as asset values enhance upon completion and maturity. However, the proposal by SEBI prohibits the raising of debt by MSM REITs (Real Estate Investment Trusts), which could hinder their ability to generate higher returns. Debt can bring tax efficiency and improve returns on equity, so industry experts suggest maintaining an optimal level of leverage to ensure commercial viability.

Yours and Equity Address, which offers fractional ownership of holiday homes, and Strata, which specializes in fractional ownership of office space and warehouses, are among the property consultants that have submitted their suggestions to SEBI. Strata emphasizes that bringing fractional ownership platforms under regulatory oversight would ensure that investors benefit from good corporate governance and transparency. They propose that the requirement for sponsors to have a minimum of five years of experience as developers or fund managers be reconsidered, given the novelty of the industry in India.

They also suggest a longer transition period due to the complexities associated with existing and new structures. Shravan Gupta, co-founder and CEO of Yours, supports the exclusion of residential and luxury residential assets from the ambit of MSM REIT regulations, stating that luxury residential homes are intended for privileged usage rather than public usage.

The operators of these fractional property-ownership platforms recommend broadening the clause that requires sponsors to have at least five years of experience in the real estate industry as either developers or fund managers. They argue that this requirement could exclude many players due to the industry's newness in India.

In summary, the operators of fractional property-ownership platforms are actively engaged in providing suggestions to SEBI regarding the regulation of online platforms offering fractional ownership of real estate assets. They propose various amendments such as allowing investments in under construction assets, reducing experience requirements, extending the transition period, and exempting luxury residential properties from regulations. These suggestions aim to strike a balance between investor interests, commercial viability, and good governance within the fractional property-ownership sector.

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Fractional property-ownership platforms propose regulatory amendments to SEBI

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