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Table of Content
- 40% of Urban Grade A Office Stock Eligible for SM REIT Investments
- Fractional Ownership Market Expected to Exceed $5 Billion by 2030
- Why SM REITs Were Needed in the Indian Market
- How Fractional Ownership Platforms Work
- SEBI’s Move to Formalise the Sector Through SM REITs
- A Strong Growth Runway for Grade A Office Investments
India’s commercial real estate market is entering a new phase of institutionalised investment, with nearly $44 billion worth of Grade A office assets now considered suitable for Small and Medium REITs (SM REITs). These assets, spread across the country’s top seven cities, represent around 40% of the total Grade A inventory, according to a recent analysis by JLL. As the market formalises and regulatory clarity increases, the fractional ownership segment is projected to surpass $5 billion in AUM by 2030, signalling significant opportunities for retail investors.
40% of Urban Grade A Office Stock Eligible for SM REIT Investments
The analysis highlights that cities like Mumbai and Delhi NCR hold the largest acquisition base due to a strong concentration of small and mid-sized, well-leased commercial projects. These segments have historically been difficult for retail investors to access, but the emergence of SM REIT structures promises to change that.
Tech-forward markets such as Bengaluru and Hyderabad are also emerging as strong contenders for investors looking to enter the Grade A office ecosystem. The two cities continue to draw corporate occupiers, supported by robust leasing activity and high-quality mid-sized assets, making them ideal for SM REIT portfolios.
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Fractional Ownership Market Expected to Exceed $5 Billion by 2030
The report notes that while the SM REIT ecosystem will face compliance-related adjustments as regulations mature, the sector is positioned for long-term expansion. With increasing investor appetite for stable rental yields and premium Grade A office properties, analysts expect strong traction over the next five years.
Why SM REITs Were Needed in the Indian Market
Historically, access to commercial real estate remained limited to institutional investors, HNIs, and sovereign funds due to high ticket sizes, limited market expertise, and complex asset evaluations. Despite the strong yield profile of Grade A office assets, most retail investors found the entry barrier too steep.
The introduction of Real Estate Investment Trusts (REITs) followed by the rapid rise of Fractional Ownership Platforms (FOPs) has fundamentally changed this landscape. These models helped broaden participation by breaking large commercial assets into accessible, fractional investment units.
How Fractional Ownership Platforms Work
Fractional ownership allows investors to own a share of premium commercial properties, reducing upfront investment requirements. FOPs facilitate this through Special Purpose Vehicles (SPVs), issuing securities backed by rental-income-generating assets. Investors receive returns through monthly rentals and long-term capital appreciation, net of management and operational expenses.
Currently, Grade A office spaces form the bulk of fractional ownership deals, followed by select warehouse and retail assets.
Also Read: Luxury Home Prices Jump 40% Since 2022 in Top Cities; Affordable Homes Up 26%
SEBI’s Move to Formalise the Sector Through SM REITs
To ensure transparency and investor protection, SEBI recently introduced the SM REIT framework, requiring FOPs to register under stricter regulations. These include:
- Minimum investment thresholds
- Defined issue sizes
- Limits on asset concentration
- Regular financial disclosures
- Mandatory listing on exchanges
- Higher reporting and governance standards
This framework marks the transition from loosely regulated FOPs to structured, transparent, and publicly governed investment vehicles.
A Strong Growth Runway for Grade A Office Investments
With regulatory clarity, high-quality inventory, and rising investor participation, India’s Grade A office market is set for an acceleration in fractional ownership activity. As Bengaluru and Hyderabad continue to attract global corporations, their mid-sized office assets are becoming prime candidates for SM REITs.
The coming years are expected to see wider investor participation, improved asset governance, and steady income opportunities positioning SM REITs as a transformative force in India’s commercial property landscape.
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Ans 1. SM REITs (Small and Medium Real Estate Investment Trusts) are structured investment vehicles that allow retail and institutional investors to own shares in mid-sized and smaller Grade A commercial assets. They provide regulated, transparent access to rental-income-generating office properties.
Ans 2. Approximately $44 billion worth of Grade A office assets across India’s top seven cities, representing around 40% of the total Grade A inventory, is considered suitable for SM REITs.
Ans 3. Mumbai and Delhi NCR remain the largest acquisition bases, while Bengaluru and Hyderabad are emerging as strong growth markets due to robust leasing activity, tech-driven demand, and quality mid-sized office assets.
Ans 4. Fractional ownership allows investors to buy a share of premium commercial properties instead of the entire asset. Platforms structure this through SPVs, offering rental income and potential capital appreciation while lowering upfront investment barriers.
Ans 5. SM REITs were created to broaden access to commercial real estate, which historically remained limited to institutional investors and HNIs. They formalise fractional ownership, providing transparency, regulated governance, and liquidity for retail investors.
Ans 6. SEBI mandates minimum investment thresholds, defined issue sizes, asset concentration limits, regular financial disclosures, mandatory listing on exchanges, and higher reporting standards to protect investors and ensure transparency.
Ans 7. SM REITs primarily focus on Grade A office spaces, followed by select warehouses and retail properties that generate stable rental income.
Ans 8. Investors earn monthly rental income and potential long-term capital appreciation, net of management and operational costs. Returns depend on occupancy, asset quality, and market performance.
Ans 9. The fractional ownership segment in India is projected to exceed $5 billion in AUM by 2030, driven by rising investor participation and high-quality Grade A office stock.
Ans 10. Both cities continue to attract global corporates, have robust leasing activity, and host high-quality mid-sized office assets, making them ideal for structured fractional ownership under the SM REIT framework.