On 30 October 2026, a SEBI quasi-judicial authority cancelled the registration of an individual investment adviser trading as Research Guru. Among other failures, an inspection had found that it could not produce risk profiles or suitability assessments for its clients. The adviser said the records had been lost, and SEBI did not accept that. The case concerned stock market advice, not property, but the principle travels. For a regulator, risk profiling that was not recorded may as well not have happened.
Advisors weighing a private US real estate allocation face a second problem as well. A standard risk profiling questionnaire mostly measures how a client feels about price swings. A private property interest tests something else, namely whether the client can stay invested for years with no easy exit. The useful checks are therefore liquidity needs, a time horizon that runs past the target hold, concentration and currency, with the reasoning written down. The guide to US commercial real estate for advisors explains how these deals are built, and the question here is who they fit.
What SEBI's risk profiling rules ask for
The SEBI (Investment Advisers) Regulations, 2013, as amended up to 25 November 2025, set out the test. Regulation 16 requires a registered adviser to collect the client's age, income, existing investments, borrowings and risk appetite. It also asks for investment objectives, including "time for which they wish to stay invested". The adviser needs a process for assessing the risk a client is "willing and able to take", including whether the client can accept a loss of capital. The profile is shared with the client and updated periodically.
Regulation 17 then requires every recommendation to fit that profile. The adviser must understand the risks of the product and have a reasonable basis to believe the client can bear them. For a complex product, the advice must match the client's experience, knowledge, objectives, risk appetite and "capacity for absorbing loss". Regulation 19 requires records of the risk profile and the suitability assessment, kept for at least five years. SEBI's Master Circular for Investment Advisers of 6 February 2026 consolidates the circulars that sit on top of these rules.
These regulations bind SEBI-registered investment advisers. Many partners are CAs, mutual fund distributors or family office staff who work under other rules. For them the same test is still good practice, because it is the clearest way to show that a recommendation was thought through.
Why willingness and ability split for private property
Most questionnaires ask how a client would react if a portfolio fell sharply in a month. That is a fair test for listed assets, which reprice every day. A private property interest does not. Its value usually comes from periodic appraisals, so a client may see a steady number for quarters and feel comfortable, while being unable to sell at any price.
That gap is why ability, not willingness, decides most private property cases. The interest is not listed, transfers before exit are usually restricted by the offering documents, and the client should expect to hold for the full period. A client who scores as aggressive on a questionnaire can still be unsuitable if a known expense falls due in three years. A cautious client with ample liquid assets and no near-term needs may pass the ability test comfortably.
Four tests for client suitability in private property
The first is liquidity. The advisor should list the client's known cash needs over the next several years, such as a child's education, a home purchase or a business commitment, and confirm that liquid assets elsewhere cover them. The calculation should include tax cash. For example, a client remitting ₹60 lakh for investment in tax year 2026-27, with no earlier remittances, pays TCS of 20 per cent on ₹50 lakh, or ₹10 lakh. That ₹10 lakh returns only as a credit or refund after the return is processed, so ₹70 lakh leaves the client's account, not ₹60 lakh.
The second is the time horizon. A deal's target hold is a plan, not a promise. A sale can be delayed if the market is weak or a loan has to be refinanced, and the client cannot leave early. The client's horizon should therefore run past the stated hold, with room to spare.
The third is concentration. A single private deal ties a client to one property, one sponsor and one market. Regulation 16 already asks for existing investments and borrowings, so the advisor can see how much of the client's wealth is already illiquid. Indian property, unlisted shares and a family business all count, and a client already heavily illiquid at home needs a strong reason to add more abroad.
The fourth is currency. The client's goals are usually in rupees, while the investment is valued in dollars. A rupee move can change the outcome in either direction. A client with dollar needs, such as a child studying in the US, faces this differently from one who will bring the money home.
Matching the client to a route
A client who fails the ability test may still want US property exposure, and each route asks something different of the client. Listed US REITs can be sold on any trading day, but their prices follow the stock market, so they test willingness more than ability. The comparison of REITs vs private real estate sets out how each prices the same buildings. GIFT City funds and other fund routes offer pooled exposure with liquidity that varies by fund, as the guide to GIFT City mutual funds explains. Private US real estate gives exposure to a specific property and its income, at the cost of liquidity. None of these is better for every client, and the risk profile is what decides between them.
Whatever the route, the risks should be named plainly in the conversation. Capital can be lost, property values can fall, tenants can leave and distributions may not be paid. Borrowing at the property level magnifies losses, currency movements change the rupee value, and a single deal concentrates all of this in one place. In a private deal, illiquidity sits on top of every other risk.
What advisors should record
The suitability note for a private property allocation should be short and specific. It should state the client's known cash needs and their dates, the horizon compared with the stated hold, and the allocation as a share of net worth and of illiquid holdings. It should also record the currency of the client's goals, the risks explained and the client's confirmation. When circumstances change, such as a job move, a sale of the family business or a new loan, the note should be updated, because Regulation 16 expects the profile to stay current.
Raveum offers eligible clients US real estate. Indian clients invest through a US corporation, known as a blocker, that holds the property interest, and typically receive Form 1042-S. Advisors who introduce clients through Raveum's partner page keep the suitability judgement for each client.
The October order is a reminder that the regulator reads the file, not the conversation. For private US real estate, the file should show the test that matters, which is whether the client can stay invested, not only how the client felt about a hypothetical fall. The guide to US commercial real estate for advisors covers the deal side. The client side starts with a risk profile that asks about time and cash as carefully as it asks about nerve.
Frequently Asked Questions
What is risk profiling in investment advice?
Risk profiling is the process of working out how much risk a client is willing and able to take. Under SEBI's Investment Advisers Regulations, a registered adviser collects details such as age, income, existing investments, borrowings, objectives and holding period, assesses the client's capacity to accept a loss of capital, and shares the resulting profile with the client.
What is the difference between risk appetite and risk capacity?
Risk appetite is how much risk a client is willing to accept, usually measured by attitudes to price falls. Risk capacity is how much risk the client can afford, given income, cash needs, horizon and other assets. For a private property interest that cannot be sold easily, capacity usually decides suitability more than appetite does.
Does a SEBI registered investment adviser have to keep risk profiling records?
Yes. Regulation 19 of SEBI's Investment Advisers Regulations requires a registered adviser to keep records of each client's risk profiling and suitability assessment, along with the advice given and its rationale. The records must be preserved for at least five years, in physical or electronic form, and SEBI checks them during inspections.
What does a risk profiling questionnaire miss for private real estate?
A typical questionnaire measures reactions to market falls, which suits listed assets that reprice daily. Private real estate is valued by periodic appraisal and cannot easily be sold, so the questionnaire can miss known cash needs, the gap between horizon and hold period, existing illiquid holdings and currency exposure. Advisors should test these separately.
Which clients are usually unsuitable for private US real estate?
Clients with known cash needs within the holding period, those whose horizon is shorter than the stated hold, and those already concentrated in illiquid assets are usually poor fits. Private US real estate can lose capital, distributions may not be paid, and currency moves affect rupee value, so it suits only eligible clients who can wait.
How often should a client's risk profile be updated?
SEBI's Investment Advisers Regulations require the client's information and risk assessment to be updated periodically, without fixing one interval for every case. In practice, advisors should revisit the profile at regular reviews and after any major change, such as a new loan, a job move, a business sale or a large planned expense.
This article is for general education and is not tax, legal or investment advice. Rules change and depend on individual circumstances. All investing involves risk, including loss of capital, illiquidity and currency movements. Offerings on Raveum are available to eligible investors only and are not open to the general public.
