To improve the ease of doing business for Small and Medium Real Estate Investment Trusts (SM REITs), the market regulator, the Securities and Exchange Board of India (SEBI), has standardized disclosures in draft scheme offer documents and simplified public issue processes for these schemes. According to SEBI’s notification, the disclosure in the scheme offer document has been divided into two parts: Key Information of the Trust (KIT), which provides details about the SM REIT, its investment manager, trustee, and overall structure, and Key Information of the Scheme (KIS), which contains specifics about the individual scheme and its assets.
For processing the KIT and KIS, SEBI has outlined that both documents are required for the first scheme’s submission for review. For subsequent schemes, only the new KIS must be submitted, while the KIT is updated for records, with SEBI reviewing only the KIS.
SEBI has stipulated that any significant changes in the KIT must be disclosed through an addendum on the SM REIT’s website and reported to the regulator and stock exchanges within seven days. Additionally, the investment manager must update the KIT every six months and disclose the updated KIT on the SM REIT’s website within 30 days after the half-year ends. The updated KIT needs to be filed with SEBI and stock exchanges for record-keeping within the same 30-day period.
Regarding public issue processes for SM REITs, SEBI has extended the application of REIT Guidelines to SM REITs with certain exceptions. SEBI has specified that a scheme of SM REIT can undertake an initial public offering of its units only via a public issue, which must occur within one year of receiving SEBI’s observations. If this timeline is not met, a fresh draft scheme offer document must be filed.
SEBI’s notification indicates that if a scheme of SM REIT opts to utilize leverage as per the regulations, the minimum subscription amount shall be 90 percent of the fresh issue size specified in the KIS. If the scheme does not opt for leverage, the minimum subscription must be 100 percent of the fresh issue size.
The regulator has amended the Small and Medium Real Estate Investment Trusts (SM REITs) Rules to implement these changes. SM REITs, introduced in March 2024, were designed to facilitate smaller real estate investments and enhance participation in the sector. These trusts operate at a smaller scale compared to regular REITs, with a minimum asset value of Rs 50 crore, while regular REITs require a minimum of Rs 500 crore. SM REITs can establish special purpose vehicles (SPVs) to manage assets and must invest 95 percent of assets in completed, revenue-generating properties, distributing 95 percent of net income to investors quarterly.
