Sebi facilitates ease of doing biz for SM REITs; standardises disclosures in scheme offer document

To facilitate ease of doing business for Small and Medium REITs (SM REITs), markets regulator Sebi has standardised disclosures in draft scheme offer document and simplified public issue processes for such schemes. In its notification, the regulator has standardised disclosures in scheme offer document by splitting the document into two parts — Key Information of the Trust (KIT) that contains information about the SM REIT, its investment manager, Trustee, and overall structure and Key Information of the Scheme (KIS) that includes details specific to the individual scheme and its assets.

On processing of KIT and KIS, Sebi said that for the first scheme, KIT and KIS will be filed together for its review. For subsequent schemes, only the new KIS needs to be submitted, while KIT is updated for records, and the regulator will review only the KIS.

Sebi said any material changes in the KIT will be disclosed through an addendum on the SM REIT’s website and reported to the regulator and stock exchanges within seven days.

Further, the investment manager will have to ensure that KIT is updated every 6 months and the updated KIT is disclosed on the website of SM REIT within 30 days from the end of half-year.

The investment manager is required to file the updated KIT with Sebi and stock exchanges for records within 30 days from the end of half half-year.

With regards to proposals for the public issue process for SM REITs, the regulator has extended REIT Guidelines to SM REITs with certain exceptions. Also, the regulator said a scheme of SM REIT can make an initial offer of its units by way of public issue only. Such an initial offer is required to be made within one year of Sebi’s observations. If not, a fresh draft scheme offer document needs to be filed. “The minimum subscription amount shall be 90 per cent of the fresh issue size as specified in the KIS in case of a scheme of SM REIT which opts to utilise leverage in accordance with these regulations. The minimum subscription amount shall be 100 per cent of the fresh issue size as specified in the KIS in case of a scheme of SM REIT which does not opt to utilise leverage in accordance with these regulations,” Sebi said in its notification issued on Tuesday.

To give this effect, Sebi has amended the Small and Medium Real Estate Investment Trusts (SM REITs) Rules.

SM REITs were introduced in March 2024 to encourage smaller real estate investments and increase participation in the sector. These are similar to REITs but operate on a smaller scale with a minimum asset value of Rs 50 crore compared to Rs 500 crore for regular REITs.

SM REITs can set up special purpose vehicles (SPVs) to manage assets and are required to invest 95 per cent of assets in completed, revenue-generating properties and distribute 95 per cent of net income to investors quarterly.