Regarding starting a private real estate investment scheme
Hi,
I would like to know the legality of starting a private real estate investment business as an individual. Under this scheme, investors would be invited to pool in their funds, which will be used to buy a residential or commercial property. However, unlike exchange traded REITs which are subject to SEBI guidelines, this private scheme will be different in the following ways:
a) Minimum investment amount for investors would be only Rs 50,000
b) The pooled amount will be used to purchase only ready-to-move-in commercial or residential property
c) The property will be sold at the end of 5 years or when the property doubles, whichever is earlier. The appreciated value would be distributed amongst the investors in proportion to the value of their initial investments
d) The monthly rental amount too would be distributed amongst them.
e) The value of stamp duty, registration, society charges and brokerage if any would be adjusted from the total fund amount.
f) Under the scheme, the business would charge a management fee, and a performance fee.
g) This would be a close-ended scheme, which means, investors cannot pull out money mid-way from the scheme for a period of 5 years or when the property doubles, whichever is earlier.
My questions are as under:
a) What regulations and guidelines would this business be subject to? Does it have to follow SEBI guidelines?
b) What would such a business be classified as (eg private REIT, private real estate fund?)
c) Can this business advertise freely, inviting investors?
d) Is such a business required to register itself as a company or can it be a proprietorship?
Thanks