SEBI wants to regulate fractional real estate ownership platforms to protect small investors

Someone with Rs 1 lakh in savings can't realistically think of buying a property in Mumbai for investment, but what if they didn't have to bear the entire cost?

Finding others to chip in and buy high-priced real estate in Mumbai doesn't sound feasible either, but that's where fractional investment comes in.

Platforms that offer the option to invest in small portions of properties, have also caught the Securities and Exchange Board of India's attention, and now it wants to regulate them.

Need accurate valuation

• The aim of SEBI's focus on these platforms which require a minimum investment as low as Rs 1 lakh, is to protect small investors.

• It has flagged the risk of mis-selling, due to a lack of standard, uniform selling practices and independent valuation.

• According to SEBI's proposal, such firms must be included in the framework for medium to micro real estate investment trusts, with separate sponsors and investment managers.

Ensuring credibility

• SEBI has also proposed minimum net worth for managers and sponsors, at Rs 1 crore and Rs 2 crore respectively.

• The real estate on offer via platforms should also be in line with definitions set by REIT regulations.

• Fractional real estate investment has been gaining popularity in India recently, although it has been around in the US and markets such as Dubai since 2015.