Sebi warns investors as Strata exits SM REIT framework post legal row

Strata, with Rs 2,000 crore AUM, had not launched SM REIT schemes before surrendering its registration following Sebi discussions and legal proceedings

The Securities and Exchange Board of India (Sebi) has issued a warning to investors regarding Strata, a commercial real estate platform founded by Sudarshan Lodha and Priyanka Rathore, after it surrendered its licence as a small and medium real estate investment trust (SM Reit).  

 

Strata had registered as an SM Reit, a new framework introduced by Sebi for fractional ownership platforms to offer real estate investment products. However, after certain concerns and discussions with Sebi, Strata has surrendered its licence.

 

Strata received Sebi approval in January and had planned to launch six schemes during this financial year.

 

So far, it has not yet launched any SM Reit scheme nor has it migrated any pre-existing fractional real estate entities to the SM Reit framework.

 

 

“Strata SM Reit has surrendered its certificate of registration as an SM Reit. It will not hold out or represent itself as a Sebi-regulated intermediary or SM Reit,” stated the market regulator.

 

Sebi clarified that the decision followed legal proceedings against the promoters of Strata SM Reit.

 

The regulator held discussions with the company, its independent director, compliance officers, and the trustee. Subsequently, Strata surrendered its registration.

 

The legal dispute is with a Tamil Nadu-based real estate firm engaged in acquiring and developing land for industrial and warehousing projects. 

 

According to the anticipatory bail order of the Madras High Court, a case was filed against Lodha for allegedly seeking information by impersonating as a Sebi official and creating a fake email with her name.

 

However, Lodha’s representatives denied the allegations and submitted that as the complainant did not succeed in arbitration and other civil proceedings, it filed a ‘false complaint’ in order to ‘arm-twist and give a criminal colour to the dispute.’

 

The high court has granted anticipatory bail in the matter.

 

“In light of the ongoing matter, we have voluntarily surrendered our SM Reit licence without admitting or denying any wrongdoing, as a measure of abundant caution. Upon conclusion of the current litigation, we intend to apply for a fresh licence at a future date. This matter does not affect the existing investments with Everstrat,” said Strata in a statement issued on Wednesday.

 

Strata manages over ₹2,000 crore in assets under management (AUM). The minimum investment for SM Reits is set at ₹10 lakh.

 

The norms for SM Reits were introduced in 2024 to bring fractional ownership platforms under regulatory oversight, reduce risk, and enhance investor protection.

 

Under the new framework, both residential and commercial properties valued at a minimum ₹50 crore can be included in SM Reits.

 

Previously, only large-scale commercial properties were eligible for Reits, with significantly higher minimum investments.

 

The new structure also introduces requirements for sponsors to have a vested interest (referred to as ‘skin in the game’) and sets rules on leverage.