The Securities and Exchange Board of India (SEBI) has released a consultation paper to formulate regulations around fractional ownership platforms (FOPs). SEBI has invited public comments on the regulations and the last date for submitting comments is May 27. What is an FOP: FOPs are platforms that provide investors with fractional ownership of real estate. The minimum investment allowed on these platforms typically ranges between INR 10 lakhs to INR 25 lakhs. Fractional investment or ownership of real estate through FOPs splits the cost of acquisition of real estate among several investors who invest in securities issued by a Special Purpose Vehicle (SPV) established by the FOP. Why it matters: Before SEBI came out with this consultation paper, FOPs lacked regulatory oversight. One of the regulations that they could fall under was State-level Real Estate (Regulation and Development) Act, 2016 (RERA) if any was present in their state. But this was only true for the FOPs which were operated by real estate agents or brokers. Even for the FOPs that would fall under this category, RERA has no protections in place for the investor. Overall, the lack of uniformity in disclosure standards, transparency in valuation, management fees, and maintenance costs all signal the need for regulatory measures specifically designed for FOPs. Highlights of the proposed regulations: Regulating FOPs under Real Estate Investment Trusts Regulations (REIT), 2014: SEBI had previously created regulations for Real Estate Investment Trusts (REIT) which allow people to invest in real estate assets either directly or through…
SEBI releases a consultation paper on fractional ownership platforms for real estate investment
The Securities and Exchange Board of India (SEBI) has invited public comments on the regulations and the last date for submitting comments is May 27
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