SM REITs explained: the ₹10 lakh unit, completed buildings only, 200 investors, and fractional platforms

Rules and rates as of 12 October 2026.

If you have seen offers to own "a slice of a Grade A office" for a few lakh rupees, you have met fractional ownership. Since March 2024, SEBI has a formal home for this kind of pooled, rent-earning property: the small and medium real estate investment trust, or SM REIT. This explainer sets out what the rules actually say, where the ₹10 lakh figure comes from, and how an SM REIT differs from the platforms that came before it.

Where SM REITs sit in the rulebook

SM REITs were added to the SEBI (Real Estate Investment Trusts) Regulations, 2014 by an amendment notified on 8 March 2024. They have their own chapter, Chapter VIB ("Small and Medium REITs"). The regulations have been amended several times since; the consolidated version on SEBI's website is marked "last amended on April 18, 2026".

The starting point is the definition of a REIT in regulation 2(1)(zm). A REIT is a person that "pools rupees fifty crores or more for the purpose of issuing units to at least two hundred investors" to acquire and manage real estate, so that investors get the income without day-to-day control. Explanation 1 says this includes an SM REIT. Regulation 3(1) adds: "No person shall act as a REIT unless it is registered with the Board."

That two-part test, ₹50 crore and 200 investors, is what pulled the larger fractional platforms into SEBI's net.

The four numbers that define an SM REIT

₹50 crore to under ₹500 crore per scheme

One SM REIT can run several schemes, each with its own unitholders and assets. Under regulation 26P(2), as quoted in SEBI's SM REIT FAQs (issued 18 June 2024), a scheme cannot offer units unless the assets it proposes to acquire are worth at least ₹50 crore and less than ₹500 crore.

At least 200 investors

The same regulation requires at least 200 unitholders in a scheme, not counting the investment manager, its related parties and associates. Some of the people in the pool are therefore strangers to the manager by design.

₹10 lakh per unit

SEBI's FAQs state that "the minimum price of each unit of the scheme of the SM REIT shall be rupees ten lakhs". A SEBI board memo from December 2024 on easing SM REIT rules again describes the "minimum price of each unit of scheme being Rs. 10 lakhs" as an existing feature, and does not propose changing it. So the ₹10 lakh is a floor on the price of one unit, not a separate cap on how much you can put in. A scheme document filed with SEBI in July 2025 shows the same thing in practice: minimum bid of ₹1 million (₹10 lakh), bid lot of one unit.

We could not read the SM REIT chapter in SEBI's April 2026 consolidated text (the file did not fully load for us), so check the scheme's offer document for the current unit price rule before relying on this figure.

Completed, rent-earning buildings only

The FAQs say an SM REIT "shall invest only in completed and revenue-generating properties", and that under-construction or non-revenue properties cannot be held. The investment conditions require at least 95% of the value of each scheme's assets to be in completed, revenue-generating property. If your interest is in a project still being built, an SM REIT is not that.

How units are sold and held

Units in a public issue are sold through the stock exchange platform by book building, not at a fixed price, according to the FAQs. After listing, units trade on the exchange. Listing is not the same as liquidity: with a ₹10 lakh ticket, the pool of possible buyers is smaller, so check recent trading before assuming an easy exit at or above the issue price.

Leverage is allowed at scheme level subject to a ceiling in regulation 26U(5); the SEBI board, when approving the framework in March 2024, said borrowing would need disclosures and, where applicable, unitholder approval. The board also decided that SM REIT assets would be valued annually.

SEBI's December 2024 memo recorded three SM REITs registered as of 30 November 2024. Each has its own register entry on SEBI's website, which is the place to confirm a name before you go further.

What happened to fractional ownership platforms

The FAQs answer the migration question directly. Migration into an SM REIT "is not mandatory if such structure does not fall under the ambit of the definition of REIT". The definition also says a company that acquires and manages property and issues securities is not a REIT. Structures that did fall within the definition, and wanted to come under the SM REIT umbrella, had to file a migration plan with their registration application.

To make that switch workable, SEBI relaxed the ₹50 crore and 200-investor conditions and the manager's minimum holding for migrating structures. The relaxation applied only if the application was made within six months of the 8 March 2024 notification and migration was completed within six months of registration.

Two practical problems the FAQs acknowledge: old fractional holdings rarely come in neat ₹10 lakh blocks, and the rules have no provision for "odd value" holdings. SEBI suggests holders trade among themselves, the old company buys back part of the holding, or a trust pools odd lots into ₹10 lakh units and sells them within a year.

Feature	SM REIT scheme	Fractional platform (outside REIT definition)
Regulator	SEBI, Chapter VIB of REIT Regulations	Not registered as a REIT; depends on structure
Asset size	₹50 crore to under ₹500 crore per scheme	No REIT size rule
Investors	At least 200, excluding manager's side	No REIT investor floor
Ticket	Unit price at least ₹10 lakh	Set by the platform
Property type	At least 95% completed, rent-earning	Set by the platform
Where units trade	Listed on a stock exchange	Usually off-exchange

Worked example: what ₹10 lakh earns, before tax

All figures below are illustrative assumptions, not any scheme's numbers. Take one unit bought at the issue price of ₹10,00,000.

• Rent attributable to your unit, at an assumed 9% of asset value: 9% × ₹10,00,000 = ₹90,000
• Investment manager fee, assumed 1% of asset value: ₹10,000
• Other trust and property costs, assumed 0.5%: ₹5,000

Net distributable cash flow for your unit = ₹90,000 − ₹10,000 − ₹5,000 = ₹75,000 a year, a cash yield of ₹75,000 ÷ ₹10,00,000 = 7.5%.

Now the price you pay matters. If the unit trades at ₹10,50,000 and the cash flow is unchanged, your yield is ₹75,000 ÷ ₹10,50,000 = 7.14%. At ₹9,50,000, it is ₹75,000 ÷ ₹9,50,000 = 7.89%. A half-percentage-point change in fees moves the cash flow by ₹5,000 a year on one unit, the same as a 0.5% swing in rent.

Distributions from a REIT can carry different components, such as interest, dividend and repayment of debt, and each can be taxed differently in your hands under the Income-tax Act, 2025. We have not verified the current treatment for this piece, so we have not computed tax here. The scheme's offer document will set out the split; a chartered accountant can apply it to your income.

Questions worth asking any SM REIT scheme

• Is the trust on SEBI's register as an SM REIT, and which scheme is this?
• What is the tenant list, and when do the leases end?
• What are all the fees, as a percentage of asset value and of cash flow?
• Does the scheme borrow, and how much?
• How are distributions split between interest, dividend and repayment of debt?

An SM REIT is a regulated wrapper, not a guarantee. The rules control who can sell it and what it may own; they do not make a tenant pay rent or a building hold its value.