{"id":141596,"date":"2026-05-11T10:01:17","date_gmt":"2026-05-11T10:01:17","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=141596"},"modified":"2026-05-11T10:35:55","modified_gmt":"2026-05-11T10:35:55","slug":"india-real-estate-funds","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/india-real-estate-funds\/","title":{"rendered":"India: Real Estate Funds"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-141596","comparative_guide","type-comparative_guide","status-publish","hentry","guides-real-estate-funds","jurisdictions-india"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Trilegal<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2020\/07\/trilegal-1.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Trilegal<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2020\/07\/trilegal-1.jpg\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Real Estate Funds laws and regulations applicable in India<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the principal legal structures used for investment in real estate (e.g., limited partnerships and other fund vehicles, real estate investment companies, real estate investment trusts\/ unit trusts)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Investment in real estate in India can be structured either directly into the real estate company or through alternative investment funds (AIFs) and real estate investment trusts (REITs) set up in India. While an AIF can be structured as a trust, or a limited liability partnership, or a company incorporated under local laws in India, REITs are structured as trusts in India. AIFs in mainland India are registered with the Securities and Exchange Board of India (\u201cSEBI\u201d) under the SEBI (Alternative Investment Funds) Regulations, 2012 (\u201cAIF Regulations\u201d), and REITs are registered with SEBI under the SEBI (Real Estate Investment Trusts) Regulations, 2014 (\u201cREIT Regulations\u201d).<\/p>\n<p>Category II AIFs are the preferred category for real estate investments and are structured as close-ended investment trusts investing primarily in unlisted securities. Although there is no separate registration category for real estate-focused funds, as of 2026, over 1,800 AIFs are registered with SEBI, which comprise real estate-focused funds. In contrast, there are only 6 REITs in India. Accordingly, given the flexibility in structuring and absence of asset-specific classification, AIFs are more commonly the preferred route for real estate investments compared to REITs.<\/p>\n<p>Set out below is a brief snapshot comparing AIFs and REITs:<\/p>\n<table>\n<tbody>\n<tr>\n<td><strong>Parameter<\/strong><\/td>\n<td><strong>AIF<\/strong><\/td>\n<td><strong>REIT<\/strong><\/td>\n<\/tr>\n<tr>\n<td>Investment limitations and concentration norms<\/td>\n<td>Investments by AIFs are structured through SPVs, with each SPV generally holding at least one (1) underlying real estate project, thereby enabling ring-fencing of risks and compliance with concentration limits.<\/p>\n<p>AIFs are subject to concentration norms, i.e., not more than 25% (in case of LVFs, 50%) of investable funds in a single portfolio entity\/ special purpose vehicle.<\/td>\n<td>REITs are required under law to invest in the following manner:<\/p>\n<p>(i)\u00a0\u00a0\u00a0\u00a0\u00a0 not less than 80% of the value of REITs shall be invested in completed and rent generating properties; and<\/p>\n<p>(ii)\u00a0\u00a0\u00a0 not more than 20% of value of REIT assets shall be invested in properties which are under construction.<\/td>\n<\/tr>\n<tr>\n<td>Minimum size<\/td>\n<td>Minimum corpus of INR 200 Million (~US$ 2,400,000) per scheme; minimum investment per investor of INR 10 Million (~US$ 120,000) (subject to exemptions for accredited investors)<\/td>\n<td>Minimum offer size cannot be less than INR 2,500 Million (~US$ 30,000,000); minimum investment per investor must be INR 10,000 to INR 15,000 (~US$ 120 to US$ 180).<\/td>\n<\/tr>\n<tr>\n<td>Offer of units<\/td>\n<td>Private placement only; not permitted to be publicly offered<\/td>\n<td>Public offer and mandatory listing on recognised stock exchanges; units are freely tradable. Only subsequent issue of units can be through follow on offer, preferential allotment, rights issue, bonus issue, offer for sale or any other mechanism as specified by SEBI from time to time<\/td>\n<\/tr>\n<tr>\n<td>Net worth criteria of key parties<\/td>\n<td>No networth requirement but sponsor or manager are required to invest a continuing interest per the AIF Regulations<\/td>\n<td>Manager networth of INR 100 Million (~US$ 1,200,000); sponsor, on a collective basis to have networth of INR 1000 Million (~US$ 12,000,000) with each sponsor individually having a networth of INR 200 Million (~US$ 2,400,000).<\/p>\n<p>Sponsor to maintain 5% of the units of REIT, on a post initial offer basis.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>The government of India has also launched a special economic zone to act as an international financial services centre in Gandhinagar, Gujarat, viz., Gujarat International Fin-tech City (GIFT City). GIFT City, for the purposes of foreign exchange control regulations, is considered a person resident outside India and has a separate single-window regulatory authority, viz., International Financial Services Centres Authority (IFSCA). Domestic and offshore managers have set up fund management entities under the IFSCA (Fund Management) Regulations, 2025 (FM Regulations), for managing AIFs in GIFT City (GIFT AIFs). GIFT City provides multiple benefits from a tax perspective and thus is an attractive jurisdiction for setting up India-focused pooling vehicles.<\/p>\n<p>Direct investment from offshore into an Indian real estate company is subject to entry route conditionalities in India. Investment in equity instruments of Indian companies is subject to foreign direct investment (FDI) conditionalities. Other routes of investment in India are as a foreign portfolio investor (FPI) or a foreign venture capital investor (FVCI). Investment as an FPI requires registration with the Securities and Exchange Board of India (\u201cSEBI\u201d) under the SEBI (Foreign Portfolio Investors) Regulations, 2019 (FPI Regulations) and investment as an FVCI requires registration with SEBI under the SEBI (Foreign Venture Capital Investor) Regulations, 2019 (FVCI Regulations).<\/p>\n<p>GIFT AIFs are treated as non-resident investors for exchange control purposes; therefore, any downstream investment into India is regarded as foreign investment and must comply with applicable foreign exchange regulations.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do all these structures provide limited liability to the investors? If so, how is this achieved?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, these structures provide limited liability to the investors.<\/p>\n<p>Direct investments in Indian real estate companies will be governed by limited liability principles under Indian companies law. Under Indian law, a shareholder of a company is not responsible or liable for the acts or liabilities of the company, except where a court is of the view that the facts warrant lifting the corporate veil (i.e., disregarding the corporate entity and holding the shareholders responsible for the acts of the corporation). Indian courts respect the principle of corporate veil, which has been pierced by Indian courts in limited serious circumstances where a shareholder has actively participated in fraud, circumvention of law, or tax avoidance.<\/p>\n<p>In the case of pooling structures, AIFs, or REITs, trust structures also provide limited liability to investors up to the amount of their capital commitment, except in the event of default, payment of liabilities, and giveback obligations of the investors, and other exceptions as provided under the fund documents. Indian law governing trusts recognizes that the trustee, being the legal owner of the trust, is bestowed with the responsibility of discharging liabilities incurred by the trust. Accordingly, contract law principles would be recognized by Indian courts, and contractual agreement(s) with the investors limiting liability to capital commitments and the quantum of distributions would be respected.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does structure depend on sector (residential, industrial\/logistics, office, living, retail) or investment strategy (core, value-add, opportunistic)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The structure of investment depends on the investment strategy, including the nature of the instruments. Direct real estate investments are preferred in case no pooling of capital is perceived at the India level.<\/p>\n<p>REITs are typically set up depending on fund size and are required to invest in holding companies and\/or SPVs, properties, securities, or transferable development rights in India, and invest in asset classes as prescribed under the REIT Regulations. REITs are, however, not permitted to invest in vacant land or agricultural land or mortgages other than mortgage-backed securities, save and except where such land is contiguous to, and forms part of, an existing project being implemented in stages.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does the regulatory framework distinguish between different types of real estate funds (e.g., REITs vs. private real estate funds, development funds vs. income-generating property funds, open-ended vs closed-ended) and, if so, how?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Please refer to query #1, where we have highlighted the key differences between AIFs and REITs.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How does the regulatory calculation of leverage apply to alternative investment funds that acquire real estate assets indirectly through non-listed companies? Are there any leverage limits that apply?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Category II AIFs are not permitted to avail leverage save and except for borrowing funds to meet a shortfall in the drawdown amount and day-to-day operational requirements for not more than 30 days, on not more than 4 occasions in a year and not more than 10% of the investable funds.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there specific reporting requirements for property-level performance metrics (net operating income, cap rates, occupancy rates)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no specific regulatory reporting requirements in India mandating disclosure of property-level performance metrics for real estate funds. Given that there is no separate regulatory framework for real estate funds, the reporting obligations prescribed under the AIF Regulations apply equally to such funds. Accordingly, regulatory reporting is largely restricted to fund-level disclosures, including (i) financial information of investee companies; (ii) risk-related disclosures such as concentration risk, leverage risk, foreign exchange risk and reputation risk; (iii) material changes in the fund or its investments; and (iv) periodic reporting to investors on fund performance and governance matters.<\/p>\n<p>However, in practice, property-level reporting is driven contractually. Institutional investors typically require detailed periodic reporting on asset-level metrics, including net operating income, occupancy and leasing levels, rental yields, cap rates, tenant concentration, operating expenses, project progress (in case of development assets), and valuation updates, along with asset-specific business plans and variance analysis against projections. Such reporting is usually set out in the fund documents or side letters and forms a key part of investor monitoring and governance, even though it is not mandated by regulation.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are any disclosures required when properties are marked to market versus held at cost?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Category II AIFs are required to carry out valuation of their investments at least on a half-yearly basis by an independent valuer. However, with the consent of at least 75% of the investors by value of their investment in the fund, such valuation may be undertaken on an annual basis. These requirements apply uniformly across all Category II AIFs, though in practice, the frequency and depth of valuation may vary depending on the nature of underlying assets.<\/p>\n<p>Real estate funds follow the prescribed half-yearly (or annually, with investor consent) valuation cycle, as liquidity events are not driven by interim exits. Valuation practices of real estate funds are typically aligned with long-term asset-holding strategies rather than frequent mark-to-market requirements. It should be noted that, given that SEBI has notified the IPEV (International Private Equity and Venture Capital) Valuation Guidelines as the manner for the valuation of unlisted investments. However, contractually, fund managers agree with investors to undertake valuations in case of real estate assets on the basis of RICS.<\/p>\n<p>REITs are required to undertake half-yearly as well as annually by an independent valuer.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Who can perform the valuation function for real estate funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The valuation of the assets of a real estate fund established as a category II AIF can be undertaken by an independent valuer or an internal valuation team. Valuation for REITs must be undertaken by an independent valuer.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How often must valuations be performed and how does this differ between closed-ended and open-ended real estate funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Please refer to query #8.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the liquidity management tools you would typically expect a manager to deploy for an open-ended real estate fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In India, it is uncommon to have open-ended real estate funds. The closest to an open-ended real estate fund is a REIT. REITs provide liquidity through secondary-market trading of listed units rather than fund-level redemptions and accordingly do not rely on traditional liquidity management tools such as gates or redemption restrictions. Given that REIT units are freely tradable, investors can exit through stock exchanges, and there are no redemption rights against the REIT.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any limits on the manager\u2019s ability to restrict redemptions in open ended real estate funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In the case of REITs, there is no concept of investor redemptions, as units are listed and freely tradable on stock exchanges under the REIT Regulations. Accordingly, the question of a manager restricting redemptions does not arise, given that liquidity usually is market-driven. In contrast, Category III AIFs, which may be structured as open-ended funds, can provide for investor redemptions subject to the terms of the fund documents. Managers may impose restrictions such as lock-in periods, notice requirements, redemption gates or suspension of redemptions in specified circumstances. However, such restrictions are disclosed to investors upfront and applied in accordance with the governing documents and applicable regulatory framework.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are potential tools that a manager may use to manage illiquidity risks regarding the real estate assets of its fund (e.g., credit facilities, partial disposals, NAV financing)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Real estate funds are typically close-ended and, as such, do not permit redemptions or withdrawals. Under AIF Regulations, term extension is only permitted for up to 2 years with 66.67% investor consent. Any extension of the term beyond this is considered a violation of the AIF Regulations, regardless of investor consent having been sought. However, due to the global economic meltdown and recession, several real estate funds have faced liquidity issues. Given that Indian regulations do not permit leverage, credit facilities, or NAV financing, SEBI, basis several representations from industry players, has been continuously evolving the regulatory framework and, in 2024, introduced the framework for a dissolution period.<\/p>\n<p>Under the framework for the dissolution period, the real estate fund can extend the term of the fund equivalent to the original term with a one-time investor consent process. Such an extension must be proposed by the investment manager.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any other limitations on a manager\u2019s ability to manage its real estate funds (e.g., geographic diversification requirements, property type concentration limits, leverage restrictions)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>AIFs and REITs are not permitted to invest outside India. Concentration norms for AIFs are basis scrip as set out above.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are managers or advisers to real estate funds required to be licensed, authorised or regulated by a regulatory body? And the real estate fund itself?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>AIFs, pursuant to regulatory requirements, are required to have a manager. While specific registration for a manager is not required, AIFs are required to be registered with SEBI. Likewise, REITs are also required to be registered.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there different tiers to regulation applicable to local fund vehicles based on the size of the fund and\/ or the size of the manager?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>While the size of the manager is not material for regulation purposes, AIF Regulations have recently introduced a category of AIFs, viz., accredited investors only funds (AI-only AIFs). AI-only AIFs are sub-categorised as large value funds for accredited investors (LVFs), which are extended certain benefits such as greater flexibility in investment concentration limits, relaxation from certain investment conditions, and the ability to negotiate customized terms with investors, including in relation to governance, disclosures and reporting, reflecting the assumption that accredited investors are better placed to assess and bear risks. Accordingly, while there is no formal tiering based strictly on fund or manager size, the regulatory framework does provide a differentiated regime based on investor profile and ticket size, with larger, sophisticated investor pools benefiting from increased flexibility.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How does the appointment of a property and asset manager typically work for a real estate fund? Are there any regulatory requirements to be aware of?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>While it is typical for property and asset managers to be appointed in the context of real estate funds, and there is no regulatory bar on appointing the investment manager as the property and asset manager, SEBI has, through informal discussions, expressed disapproval of the structure. Hence, typically, a subsidiary of the investment manager is appointed as the property and asset manager. Further, property and asset managers are not regulated under Indian law.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What service providers are required by applicable law and regulation for real estate funds (e.g., property valuers, asset managers, property managers, custodians)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Given that real estate funds are not a separate category depending on the structure, whether they are AIFs or REITs, different service providers will be appointed.<\/p>\n<p>Under the AIF Regulations, the key service providers include: (i) the manager; (ii) the sponsor; (iii) the trustee (in case of trust structures); (iv) an independent valuer for periodic valuation of assets; (v) an auditor; (vi) a custodian (mandatory for Category III AIFs and for Category I and II AIFs crossing prescribed corpus thresholds); and (vii) a compliance officer, along with other intermediaries. In practice, real estate AIFs also appoint property\/asset managers and project-level advisors, though these are not specifically mandated under the AIF Regulations.<\/p>\n<p>Under the REIT Regulations, the key service providers include: (i) the trustee; (ii) the manager; (iii) the sponsor(s). They are supported by intermediaries, including valuers, merchant bankers, registrars, transfer Agents (RTAs), auditors, and custodians, ensuring compliance, asset management, and investor protection.<\/p>\n<p>In the context of AIF and REITs, the trustee, in its fiduciary capacity, is bestowed with the management of the trust. The trustee thereafter delegates its powers, duties, and responsibilities in relation to the trust to the manager through an investment management agreement. The manager, however, is prohibited from outsourcing its core management functions.<\/p>\n<p>The real estate fund is also required to appoint a merchant banker who undertakes due diligence of the offer document in line with the AIF Regulations or the REIT Regulations and provides a due diligence certificate for the purpose of filing the application with SEBI.<\/p>\n<p>The fund also requires fund administrators who oversee non-core compliance functions, accounting and record maintenance, custodian for the safekeeping of securities, registrar and share transfer agents for collection and payment of stamp duty and issue of units to investors in dematerialised form, auditors for the auditing of the books of accounts of the fund, independent valuers for undertaking valuation of the assets of the funds in accordance with the AIF Regulations or the REIT Regulations, as applicable.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there local residence or other local qualification or substance requirements for the real estate investment fund and\/or the fund manager and\/or the property and asset manager to the fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under the AIF Regulations, the manager is required to be incorporated and domiciled in India. Further, the manager is required to have a minimum of 1 (one) individual who meets the requirement prescribed under the AIF Regulations, viz., (i) NISM certification requirement; and (ii) professional qualification in finance, accountancy, business management, commerce, economics, capital market or banking from a university or an institution recognized by the Central Government or any State Government or a foreign university, or a CFA charter from the CFA institute or any other qualification as may be specified by SEBI. AIF managers are also required to appoint a compliance officer who is required to satisfy the certification requirement. In addition, under the AIF Regulations, the manager entity is required to meet infrastructure requirements, including requisite IT infrastructure and in-house professionals in legal documentation and structuring, compliance, tax, finance, accounting, risk management, human resources, and investor reporting.<\/p>\n<p>AIFs and REITs are set up as trusts, and as such, there is no separate legal identity. Indian trusts have dual ownership, i.e., legal ownership vests with the trustee, and beneficial ownership is with the investors\/ beneficiaries.<\/p>\n<p>The manager is generally set up as a private limited company (Pvt Co) or a limited liability partnership (LLP) and, accordingly, must comply with applicable corporate law requirements. Under Indian law, such entities are required to have at least 2 directors (in the case of a Pvt Co) or at least 2 designated partners (in the case of an LLP). While the property and asset manager is not regulated by any sector regulator, conditions of Pvt Co or LLP will apply depending on the form of the property and asset manager.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What rules apply to foreign managers or advisers wishing to manage, advise, or otherwise operate funds domiciled in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Foreign managers or advisers wishing to manage, advise, or otherwise operate funds will be required to set up an Indian entity, either in the form of a Pvt Co or an LLP, given that SEBI expects a local entity on whom it can have oversight. The Indian entity can be set up as a wholly owned subsidiary, in partnership with a local partner, or by a local partner, under which the Indian entity will enter into a services agreement with the offshore entity. The local Indian entity that proposes to act as manager will need to meet the substance and personnel requirements set out above.<\/p>\n<p>While the manager needs to be domiciled in India, there is no requirement for the sponsor to be domiciled in India, and the sponsor can be domiciled offshore. If the manager entity is a wholly-owned subsidiary of the foreign manager or where the foreign manager holds more than 50% of the [share capital or capital contribution] in the Indian entity, or has \u2018control\u2019 in the Indian entity or the sponsor is domiciled outside India, it will be considered as a foreign-owned or controlled (FOCC) entity.<\/p>\n<p>From an exchange control perspective, an AIF whose manager or sponsor is an FOCC entity, or whose sponsor is domiciled outside India, will need to comply with FDI conditionalities, including sectoral caps, entry routes, pricing guidelines, and other conditions, when making investments in real estate entities. While FDI is prohibited in \u2018real estate business\u2019, construction of farmhouses and trading of transferable development rights, 100% FDI is permitted in: (i) construction development projects (including development of townships, construction of residential \/commercial premises, roads or bridges, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure, townships); and (ii) completed projects for operating and managing townships, malls\/shopping complexes and business centres.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is the typical level of management fee paid for real estate funds? Does it vary by sector or investment strategy (core, value-add, opportunistic)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Management fee is dependent on the strategy of the fund, i.e., whether it is a real-estate credit fund or a real-estate debt fund. In case of debt funds, the management fee is paid on invested capital, i.e., with respect to an investor, the capital contributions made by such investor, as reduced by an amount equal to, in respect of a portfolio investment that has been fully or partially realised, transferred or completely written off, the portion of the capital contribution of the investor corresponding to the capital that had been invested or committed to be invested in such portfolio investment (to the proportionate extent of such realization, transfer or write off in case of partial realizations, transfers or write offs). However, in the case of equity funds, the management fee during the commitment period is based on capital commitments, whereas the management fee in the post-commitment period is based on actively invested capital.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is a typical carried interest type in real estate funds? Is there a common approach to hurdle\/preferred return, catch-up provision, or other condition based on property-specific benchmarks? If so, please explain.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Real estate funds follow the same carry structure as private equity funds. Typically, the sponsor\/manager is entitled to a carried interest of around 15\u201320%, subject to investors first receiving a preferred return (hurdle rate), which is commonly in the range of 8\u201312% IRR.<\/p>\n<p>The most common distribution model is a European-style waterfall (fund-as-a-whole), under which investors are first returned their contributed capital, followed by the preferred return, after which the manager becomes entitled to carried interest. A catch-up mechanism is often included, allowing the manager to receive a higher share of distributions until the agreed carry split is achieved. In some cases, particularly for development-focused or deal-by-deal strategies, an American-style waterfall may be adopted, though this is less common.<\/p>\n<p>While carried interest is generally calculated at the fund level, certain structures, especially those involving project-level SPVs, may incorporate asset-level performance thresholds or IRR benchmarks, including development milestones, leasing targets, or exit valuations. However, the overarching framework remains aligned with standard private equity carry models, with limited deviation specific to real estate beyond the inclusion of project-level considerations.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are typical management fees for real estate funds paid during and after the investment period, and how do these vary (if at all) in terms of the basis of the fee?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Please refer to our response to query #21.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any particular requests investors in real estate funds are likely to ask for in their side letters?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Typically, contractual requirements relating to the reporting and valuation of real estate assets, if specific to an investor, can form part of the side letter. However, these can be included as part of the main investor agreement.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can real estate funds be marketed to non-professional (retail) investors in your jurisdiction? If so, is this a particular form of real estate fund and what are the regulatory requirements?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Given that there is no regulatory framework specifically for real estate funds, the AIF Regulations will govern investments in AIFs. Under AIF Regulations, there is no minimum qualification criterion for the investor so long as the investor makes a minimum investment of INR 10 million (~US$ 120,000), save in the case of AI-only Funds, where the investor is required to be an accredited investor without a requirement for minimum investment. As stated above, in case of LVFs, the investor must be an accredited investor and make a minimum investment of INR 250 million (~US$ 3,000,000). In case of REITs, the minimum investment is INR 10,000 to INR 15,000 (~US$ 105 to US$ 160).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there additional restrictions on marketing real estate funds to government entities or similar investors (e.g. sovereign wealth funds) or pension funds or insurance company investors, given their typical allocation targets for real estate?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>As mentioned above, there is no separate category of AIFs for real estate funds; therefore, the conditions applicable to government entities or similar investors, such as sovereign wealth funds, pension funds, and insurance companies, in the case of investment in AIFs, apply as such to real estate funds as well.<\/p>\n<p>In the case of insurance companies, investments are governed by the regulations and investment guidelines issued by the Insurance Regulatory and Development Authority of India, which prescribe, inter alia, exposure limits to AIFs as a proportion of the insurer\u2019s overall investment portfolio, restrictions on investment typically to Category II AIFs, conditions relating to the absence of leverage or complex structures, and requirements around sponsor\/manager track record, governance standards and internal board-approved investment policies. Similarly, pension funds regulated by the Pension Fund Regulatory and Development Authority are subject to prudential investment norms, including caps on exposure to AIFs and alternative assets, restrictions on Category I and Category II AIFs, minimum track record and due diligence requirements for fund managers, and diversification and risk management conditions.<\/p>\n<p>In the case of sovereign wealth funds and other government-backed investors, there are no specific India-centric marketing restrictions. However, such investors are typically subject to their own internal investment mandates, ESG frameworks and governance requirements, which may impose additional diligence, reporting and compliance obligations on fund managers.<\/p>\n<p>Additionally, insurance companies and pension funds, as a matter of their own internal investment policies, might restrict or prohibit allocation to real estate funds or impose conditions more stringent than those prescribed under applicable law.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What sustainability due diligence or disclosure requirements and ongoing compliance obligations apply to managers of real estate funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>While there is no legal requirement for sustainability due diligence or disclosure requirements for real estate funds, real estate funds with sophisticated institutional investors such as development financial institutions and sovereign wealth funds do contractually agree with the manager for sustainability and disclosure requirements such as environmental and social due diligence in line with international standards, ESG policy adoption and implementation, periodic ESG reporting (including key performance indicators on energy, water, waste and emissions), climate risk assessments, health and safety compliance, anti-corruption and governance frameworks, and incident reporting mechanisms.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any mandatory energy efficiency reporting or carbon footprint disclosure requirements?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No, there are no mandatory energy-efficiency reporting or carbon-footprint disclosure requirements.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">4624<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/141596","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=141596"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}