In 2024, SEBI notified the Small & Medium REIT framework. Suddenly every fractional platform started calling itself SM-REIT-ready. They are not all the same. Here's how to tell them apart.
SM-REIT — the regulated path
An SM-REIT is a listed Real Estate Investment Trust with assets between ₹50 Cr and ₹500 Cr. It is registered with SEBI, managed by a SEBI-registered investment manager, and its units are listed on a stock exchange. Minimum investment: ₹10 Lakhs. It must distribute at least 95% of net distributable cash flow to unit holders.
Private fractional ownership — the flexible path
Private fractional deals are structured as SPVs that hold a single asset. They are not SEBI-regulated as REITs, though the platform may be registered under other frameworks. Investors hold SPV securities directly. Secondary liquidity is usually platform-matched, not exchange-traded.
Side-by-side
- Regulator: SM-REIT is SEBI-regulated; fractional SPVs are not REITs, but are bound by companies-act, securities, and tax law.
- Liquidity: SM-REIT units trade on exchanges; fractional units trade on the platform's secondary market (if one exists).
- Minimum: ₹10L for both, typically.
- Diversification: SM-REIT can pool multiple assets in one trust; fractional is usually asset-by-asset.
- Yields: SM-REIT targets 8–11% distribution yield; fractional varies widely, but 9–14% gross is the advertised range.
- Fees: SM-REIT fees are disclosed and capped by regulation; fractional fees vary by platform.
- Reporting: SM-REIT publishes standardised quarterly and annual reports; fractional reporting quality depends on the sponsor.
When to pick SM-REIT
Pick SM-REIT if daily liquidity matters, if you want exchange-level reporting, and if you are happier with pooled exposure than a single asset. It is the closer-to-mutual-fund version of fractional real estate.
When to pick fractional ownership
Pick private fractional if you want to underwrite a specific building — tenant, lease, yield, location — and back your conviction in that asset. Expect less liquidity, more control, and more skin in the deal diligence.
A common mistake
Treating the two as substitutes and picking the higher advertised yield. A 13% fractional yield is not equivalent to an 8% SM-REIT yield until you have adjusted for illiquidity, concentration, and fee drag.