Real estate has always been considered one of India's safest investment avenues. However, for most individual investors, direct commercial property investment was a distant dream, primarily due to high capital requirements, long holding periods, and management burden.
Over the past few years, fractional ownership of real estate in India has grown rapidly, supported by tech platforms, rising investor interest, and an appetite for passive income from commercial assets.
However, as the model grew, so did concerns around regulation and transparency. This led to the rise of SM REITs (Small and Medium Real Estate Investment Trusts)—a regulated investment model designed to fix the gaps of traditional fractional ownership while retaining its benefits.
Let’s look at how this journey has unfolded and why SM REITs are shaping up to be a more secure path forward.
What is Fractional Ownership and Why Did It Take Off?
Fractional ownership allows multiple investors to co-own a single commercial property. Each person contributes a portion of the total cost and, in return, receives a proportional share of the rental income and capital gains. These properties are usually managed by a professional firm, removing the hassle of direct ownership.
According to a 2023 report by Knight Frank India, fractional ownership is fast gaining traction, especially in commercial real estate, because of four major advantages:
Access to High-Value Assets: Individuals can invest in office spaces or retail properties in prime locations without needing crores of rupees.
Professional Management: All day-to-day operations, tenant handling, rent collection and maintenance are handled.
Rental Income Stream: Investors receive regular payouts from tenants.
Portfolio Diversification: Capital can be distributed across multiple properties or asset types.
Fractional ownership in India has grown rapidly thanks to online platforms that make it easy to browse properties, review legal documents, track income, and exit through secondary sales.
The Challenges: Why Fractional Ownership Needed Reform
Despite its growing popularity, the fractional model had foundational issues. The lack of regulation meant investors often stepped into deals without a clear legal framework, leaving them vulnerable to unclear ownership rights, inconsistent returns, and limited exit options. As fractional real estate platforms expanded, transparency and investor protection concerns grew.
In the context of fractional ownership real estate in India, many individuals faced risks tied to poorly structured agreements and the absence of oversight. Without professional governance, even promising fractional property investments felt uncertain. This made it clear that a more secure and regulated solution was necessary.
Table: Key Challenges Faced by Investors in Traditional Fractional Ownership
| Challenge | Impact |
| Absence of SEBI Oversight | Increased vulnerability to fraudulent schemes. |
| Limited Transparency | Difficulty in verifying property performance. |
| Illiquidity | No formal mechanism for exiting investments. |
| Legal Complexities | Potential disputes over co-ownership rights. |
Additionally, investors often encountered:
Unclear title deeds: Disputes over actual ownership shares.
Inconsistent payouts: Lack of standardised rental income schedules.
Exit difficulties: Finding private buyers to sell ownership was cumbersome.
This gap in oversight and trust created the need for a model that could retain the benefits of fractional ownership, but with regulatory safeguards.
The Evolution: SM REITs as a Stronger Alternative
Enter SM REITs Small and Medium Real Estate Investment Trusts. These are SEBI-regulated investment vehicles designed to solve the challenges of unregulated fractional ownership models.
SM REITs pool capital from multiple investors to acquire income-generating mid-sized commercial properties such as offices, co-working spaces, and retail outlets. Unlike informal ownership models, investors don’t directly own a share of the property; they hold units in a trust that manages all operations. This structure solves many problems that fractional ownership couldn’t.
Key Advantages Over Traditional Fractional Ownership
Here’s how SM REITs address the shortcomings of earlier models:
Table: SM REITs vs Traditional Fractional Ownership
| Feature | Fractional Ownership | SM REITs |
| Regulatory Oversight | Unregulated, higher risk | SEBI-regulated, audited compliance. |
| Transparency | Limited access to financial data. | Mandatory disclosures, clear reporting. |
| Liquidity | Illiquid; exits depend on private buyers. | Units tradable on approved platforms. |
| Management | Varies by agreement; potential conflicts. | Professional, independent custodians. |
| Diversification | Limited to a single asset. | Exposure to multiple properties. |
Strong Governance Backed by SEBI Regulations
SEBI has laid down precise regulatory requirements to ensure SMREITs maintain credibility and protect investors. These appointments build transparency, accountability, and a clear governance framework.
Independent Valuers
These professionals assess the value of real estate assets without bias or conflict of interest. Their evaluations help ensure fair pricing and prevent overvaluation.
Trustees
Trustees are responsible for overseeing the REIT's operations and protecting investor rights. They act as a safeguard between the REIT manager and the investors.
Annual Audits and Reports
SM REITs are required to publish annual audits and performance updates. This keeps investors informed and builds long-term trust in the platform.
Technology and Transparency in the New SM REIT Model
Technology has transformed the way investors participate in SM REITs. Everything from document verification to performance tracking is now streamlined and accessible online.
Online Access to Legal and Financial Documents
The platform lets Investors easily view title deeds, agreements, and financial statements. This simplifies due diligence and adds a layer of transparency before investing.
Real-Time Performance Tracking
Platforms provide live dashboards to monitor rental income and asset performance. This allows investors to stay updated on how their investment is doing at any time.
Exit Options Built In
Many platforms now include resale options or periodic buybacks. This flexibility allows investors to plan their exit without being locked in for years.
How We Help You Invest in SM REITs at hBits
At hBits, we specialise in Small and Medium Real Estate Investment Trusts (SM REITs). With our deep expertise and streamlined process, we help retail and HNI investors confidently access commercial real estate opportunities. Here's how we make the journey simple, secure, and transparent.
Step 1: We Start by Helping You Understand SM REITs
We explain how SM REITs function under SEBI’s framework.
You learn how returns, risks, and fees are structured.
We clarify how you earn passive rental income through listed units.
Step 2: We Help You Set Up the Right Account
We guide you in opening a Demat and Trading account with a SEBI-registered broker.
Most accounts can be set up online quickly and securely.
This account is essential to apply for IPOs and later trade units on exchanges.
Step 3: We Walk You Through the Application Process
Apply via online ASBA using net banking or platforms like ICICI Direct.
Alternatively, submit a physical form at ASBA-enabled banks.
To ensure safety, we will block your funds only after application acceptance.
Step 4: We Keep Track of the Allocation Process
Allocation is handled through the BSE/NSE systems.
We will update you on the status of your application and unit allotment.
Confirmation arrives via your broker dashboard or directly in your Demat account.
Step 5: We Assist You Once Units Are Listed
You can buy/sell units just like stocks on the exchange.
We help monitor trading activity and market dynamics.
You can compare across listed REITs to refine your investment decisions.
Step 6: We Help You Monitor and Optimise Your Investment
Receive timely updates on rental payouts.
Access performance reports and market insights.
Get guidance to make informed decisions for long-term growth.
At hBits, we focus on education, performance tracking, and long-term support so your SM REIT investment stays informed and strategic.
Final Thoughts
Fractional ownership made real estate investing easier, but SM REITs are making it smarter. They combine accessibility and diversification with SEBI-backed governance, built-in transparency, and legal clarity. Investors no longer have to choose between convenience and credibility.
With expert support from hBits, SM REITs are becoming a powerful tool for building wealth through real estate without the stress of owning or managing property.