SEBI Warns As Strata Surrenders SM REITs License: What Went Wrong & How Can It Impact Investors?
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Strata (now transitioned into Everstrat), a major fractional real estate platform in India, surrendered its SM REITs license just five months after receiving it from SEBI, without launching any schemes under the license.
SEBI has issued a warning to investors about Strata due to legal proceedings against its promoter and advised caution in dealings with the platform.
Strata's surrender of the license is linked to a dispute with its builder-partner Avigna over a project in Hosur, Tamil Nadu, and allegations of impersonation of a SEBI officer by a company executive.
The Hosur project faced issues with construction delays and disputes over funding, leading to financial losses for investors and ongoing arbitration with no resolution yet.
Despite the controversies, Strata has not admitted any wrongdoing and plans to apply for a fresh license after resolving current litigations, while assuring investors of continued operations and rental payouts.
Barely five months after it received its SM-REITs license from India’s market regulator SEBI in January 2025, SM REITs Platform Strata has surrendered its license. Regarded as one of India’s largest fractional real estate platforms, Strata surrendered its license without launching any SM REIT scheme under that crucial licence. The platform Strata was founded in 2020 by Sudarshan Lodha and Priyanka Rathore but it became ‘Everstrat’ after registering with SEBI and getting the SM REITs license earlier this year in January.
In the ongoing FY 2025-26, the platform was planning to launch six EM REITs schemes, as per a Business Standard report.
But before any of that could happen, Strata (now Everstrat) surrendered its crucial license. But why did it do so? What went wrong? Are investors smelling another fraud? Lets break it down for you from whatever details we have been able to compile about this whole Strata SM REITs fiasco till now.
SEBI’s Warning Against Strata
In its tweet early morning on 14th May, 2025, SEBI mentioned “Investors are advised to exercise caution while dealing with Strata SM REIT as it surrenders it's SEBI Registration. This is owing to certain legal proceedings etc against the promoter of Strata.”
Here’s the detailed press release of SEBI regarding Strata’s surrender of SM REITs license:
In its press release, SEBI has mentioned “Pursuant to certain news reports and review of certain legal proceedings against the promoter of a SEBI registered SM REIT, namely Strata SM REIT, SEBI engaged with Strata SM REIT, its independent director, compliance and other officers and the trustee.
Basis the engagement and discussions thereat, Strata SM REIT (small and medium real estate investment trust) 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. This communication is being issued in the interest of investors advising them to exercise caution while dealing with the entity.It may be noted that Strata SM REIT has, as on date, not launched any SM REIT Schemes nor migrated any pre-existing fractional real estate entities as a SM REIT Scheme”.
What’s Going Wrong At Strata?
Source: Mint
Strata, which is regarded as one of India’s largest fractional real estate platforms, recently surrendered its SM REITs licence after a dispute with its builder-partner over a project in Hosur, Tamil Nadu. This move also comes amidst the allegations of one of Strata’s company executives impersonating a SEBI officer, as per a Mint report.
Strata’s Disputed Project
Amidst the news of Strata surrendering its SM REITs license, the Hosur warehouse project has come to light. The project, which was launched in 2020-21, was reportedly developed by builder Avigna and funded through Strata’s fractional real estate investors, in multiple rounds.
However, disputes between Strata and Avigna have since then escalated, as per a report.
While all this was happening, Strata’s founder Sudarshan Lodha had obtained anticipatory bail from the Madras high court on 22nd April 2025 amid allegations that a company official had impersonated a SEBI officer to get information from builder Avigna.
But what exactly went wrong with the Avigna project? Well, as per media reports, over the past few years, Strata had raised money for various portions of the project, Avigna Industrial Parks in Hosur, Tamil Nadu. While several tranches were sold over that period, two key components—Box 6(c) and a planned mezzanine floor, faced issues. Box 6(c) and mezzanine floor were separate warehouses within that overall project.
Next few weeks and months saw back to back delays in construction, which eventually hit Box 6(c). Amidst all this, Strata went on to sign a memorandum of understanding (MoU) with Avigna and the tenant to add a mezzanine floor. And to fund this addition, Strata reportedly raised ₹19.5 crore from 60 new fractional real estate investors. These investors were added to the special purpose vehicle (SPV), which reportedly already had 120 investors in Box 6(c), thus effectively diluting the stake of the original investors.
However, that’s not all. The mezzanine floor for which the funding was raised through investment, was never constructed due to Strata’s disputes with that builder. For the unversed, the dispute we are mentioning in this scenario stemmed from Avigna and Strata failing to agree on a price for selling back the warehouses to Avigna, as per Mint report.
Hence, the original investors straightaway faced a nine-month rent loss, while the new investors neither received ownership nor any rental income. But, it is now being said that the tenant has taken possession of Box 6(c) and resumed rent payments. However, these flows are going only to the original investors, which leaves the mezzanine investors in the lurch.
Sadly, it's been months over months, but the arbitration proceedings between Strata and Avigna have been dragging with no outcome yet in sight.
ALT Investor’s Community Member Shares Strata’s Response Regarding The Likely Impact On Investors
Quite expectedly, investors are raising concerns over what will happen to their hard earned money, especially keeping focus on the inherent illiquidity of this fractional real estate asset class which makes the exit difficult. And to make matters even worse, there are conflicts of interest between the parties.
Builder Avigna had reportedly extended a ₹2.5 crore loan to Strata founder Sudarshan Lodha. Also, by naming it as a ‘personal transaction’, Lodha’s brother-in-law had reportedly acquired a property in the same project at a price lower than what Strata’s own investors paid.
As far as investor’s money is concerned, it’s fair to say that going immediately into a panic mode is not the right thing to do at present, especially as the SEBI is itself looking into the issue. Currently, the big issues seem to be their dispute with the Hosur warehouse property and the impersonation of a SEBI officer to get financial details from the property developer. For now, until any further update comes, investors might have to play the wait and watch game regarding this platform which is said to have over Rs 2,000 crore in AUM.
Moreover, as per the mail sent by Everstrat to one of its investors (who is a part of ALT Investor’s community), investor’s properties remain fully operational and managed by Everstrat (transitioned from Strata). They will not migrate any assets to SM REITs currently at this time. Also, there would be no disruptions in rental payouts, the FRE platform has clarified.
Strata Neither Admits Nor Accepts Any Wrongdoing
While a lot of fingers are being pointed at it, Strata has reportedly clarified that “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 the conclusion of the current litigations, we intend to apply for a fresh licence at a future date. This matter does not affect the existing investments with Everstrat (the real estate platform)."
Regarding the ₹19.5 crore fundraise from new investors, Strata has said that it was carried out via shareholder-approved extraordinary general meetings for the respective SPVs, with detailed communication sent to all investors, including the revised capitalization table and participant list.
“Existing investors also had the opportunity to and did participate in this round. While shareholding was diluted, the returns on original investments have remained unchanged."
Strata also claimed that the builder, Avigna, received ₹11.5 crore but failed to deliver the mezzanine floor. It all seems to be a blame game, right?
“Once arbitration commenced, they admitted before the tribunal to having received the funds and not constructing the mezzanine. They have committed to refunding the amount, and this resolution is currently being finalized through mediation," Strata has reportedly mentioned.
Strata has also said that rental payouts had resumed and continued to be disbursed, and that Avigna had agreed to refund the mezzanine funds.
“The reconciliation of fund flows between the SPVs and Avigna is also under review by the Tribunal, and an order for repayment is expected shortly," Strata said, as per a Mint report.
Also, regarding the ₹2.5 crore loan from Avigna, Strata mentioned that it was a voluntary contribution by Avigna's director in a separate business context as part of an advance deposit arrangement between the two entities in 2022.
“There is no evidence to suggest this was a loan, except Avigna’s unilateral and misleading statements made later. The Tribunal has already acknowledged this issue and the amount is to be returned by Avigna in parallel with the mezzanine fund recovery," Strata has said.
Strata Might Apply For A Fresh License
As per a Mint report as well as the mail received by one of ALT Investor community’s members, Strata has voluntarily surrendered its SM REIT licence, without admitting or denying any wrongdoing. The spokesperson also mentioned that Strata intends to apply for a fresh licence after the litigation is concluded.
Understanding How Fractional Real Estate Works
While we are going through what all has been happening in case of Strata, its equally important to understand how fractional real estate platforms work. Simply put, fractional real estate platforms such as Strata, Hbits and Propshare pool in money from investors to buy real estate through SPVs, which hold the underlying assets. For their invested money, investors generally receive shares or convertible debentures in the SPV and earn returns from rental income or appreciation.
It was the super fast growth of such platforms that prompted India’s market regulator SEBI to bring them under a formal regulatory framework in 2023, by introducing the SM REIT structure. SEBI’s rules even mandate skin in the game, a minimum investment of ₹10 lakh per investor, and allow only completed, income-generating assets into SM REITs.
Coming back to the Strata case, it remains to be seen what the future holds for the fractional real estate platform. Whatever is going on right now can either turn out to be a big crisis or just a hiccup in its journey!
Please note that this is an opinion blog and not an official research or investment advice. This blog aims to help retail investors make an informed decision when thinking of real estate sector. The blog neither encourages nor discourages you from investing in any particular platform or property or any asset class.
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