Sebi Puts In Place Disclosure Norms For Real Estate Investment Trusts

New Delhi: Putting in place disclosure norms for real estate investment trusts (REITs), Sebi on Monday said the offer document will contain financial information, related party transactions and past performances.

The move comes after Sebi earlier this month had issued detailed norms for public issuance of REITs, including allocation of units to institutional investors.

To facilitate growth of REITs, Sebi last month notified revised and easier regulations for raising capital through this instrument.

Sebi had notified the REIT Regulations in 2014, allowing setting up of and listing of such trusts, which are very popular in some advanced markets. However, not a single trust has been set up in India as of now as investors await further measures, including tax breaks, to make these instruments more attractive.

In a circular issued today, Sebi said the offer document would contain financial information of last three financial years. These include balancesheet, statements of profit and loss, income and expenditure, net assets and total returns.

Also, REITs will have to disclose about commitments, contingent liabilities, earnings per unit, total debt, net worth, and the debt/equity ratios before and after the completions of issue.

The trust will have to make a statement about history of interest and principal payments of REIT and operating cash flow from the projects for the last three years and interim period, if any.

With regard to related party transactions, Sebi said REIT will have to provide relevant disclosures of all related party transactions like details of related party and its relationship with REIT, nature and value of transaction.

In case of any related party transaction involving acquisition or disposal of an REIT asset, the trust will have to inform about summary of valuation report, material conditions or obligations in relation to the transactions, and commissions received by any associate of the related party in relation to the transaction.

"The offer document/placement memorandum shall contain disclosures of the projections of revenues and operating cash flows of the REIT, property-wise, over the next three years, including related assumptions," Sebi said.

REIT will have to prepare and disclose Management Discussion and Analysis by the Investment Manager, based on the financial statements. A comparison needs to be provided for the most recent financial information with previous two years.

A statement from investment manager regarding sufficiency of the working capital to fulfil the present requirements of REIT -- at least 12 months from date of listing -- will have to be disclosed in the offer document.

In case sufficient working capital is not available in the opinion of the investment manager, a statement should be provided describing how it proposes to provide additional working capital requirement.

In case of a capital offering subsequent to the initial offer, the market value of the units traded on all the stock exchanges where REIT is listed will have to be disclosed.

REITs will have to make disclosures about content and basis of preparation of financial information, which will be in accordance with Indian accounting standards, Sebi said.

The trusts will have to disclose the framework for calculation of net distributable cash flows and such cash flows at the SPV and consolidated level, it said.

An offer document of REIT will include summary of the audited consolidated financial statements (including the balancesheet and statement of profit and loss of investment manager and sponsor for the past three years, prepared in accordance with accounting standards).

"Further, if any of the investment manager/sponsor is a foreign entity and is not legally required to comply with the Companies Act, 2013, then the financial statements of such entity may be prepared in accordance with International Financial Reporting Standards (IFRS)," Sebi noted.

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