SEBI Warns Investors After Strata SM REIT Relinquishes Registration Amid Legal Scrutiny

The Securities and Exchange Board of India (SEBI) had issued a public caution regarding Strata Small and Medium Real Estate Investment Trust (SM REIT), following the entity’s decision to surrender its registration. The move came on the heels of legal proceedings involving one of the company’s promoters, prompting SEBI to clarify that Strata SM REIT is no longer a regulated intermediary.

SEBI stated in an official notice dated May 14 that it had conducted an internal review and initiated discussions with Strata’s management, including its independent director, compliance officers, and trustee. The regulator said, “Basis the engagement and discussions thereat, Strata SM REIT has surrendered its certificate of registration as an SM REIT and will not hold out or represent itself as a SEBI-regulated intermediary or SM REIT.”

The watchdog further emphasised that Strata had not launched any SM REIT schemes nor converted any of its previous fractional ownership models into compliant REIT structures. “This communication is being issued in the interest of investors, advising them to exercise caution while dealing with the entity,” SEBI added.

Legal Headwinds

The development followed allegations against Sudarshan Lodha, co-founder of Strata, who is accused of impersonating a SEBI official and using a fraudulent email ID. According to a Madras High Court document, a case was filed claiming Lodha tried to gain sensitive information under false pretences.

Lodha’s legal team dismissed the accusations, stating that the complaint arose only after the complainant failed to prevail in arbitration and civil litigation. “The complainant filed a ‘false complaint’ in order to ‘arm-twist and give a criminal colour to the dispute,’” the defence argued. The court has since granted Lodha anticipatory bail.

Strata issued a statement in response: “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,” as per a report by Head and Tale earlier this year.

Strata was one of the early entrants in SEBI’s newly minted SM REIT category, having secured its license in January 2025. The firm was going to launch six schemes in FY26, and none of them were launched before the surrender.

SM REIT regime was launched in 2024 and was created to ensure the regulation of fractional real estate platforms. It has prescribed a minimum asset size of Rs 50 crore and has limited investments to ready commercial or residential projects, excluding land or under-construction properties. The minimum investment per unit is set at Rs 10 lakh to prevent retail speculation while attracting high-net-worth individuals.