SEBI Announces Disclosure Norms for REITs
May 19, 2017 Real Estate News
India’s security market regulator SEBI has announced new disclosure norms for real estate investment trusts (REIT). As part of the newly curated disclosure norms, the said document will contain detailed information of REITs including financial data, historical performance and related party transactions.
The move by SEBI to issue disclosure norms has come a month later after the security watchdog had stated norms for public issuance of real estate investment trusts. It is worth remembering that back then, SEBI had updated several regulations aimed at making the whole task of raising capital for REIT easier and a lot quicker.
Back in 2014, SEBI had issued notification against REIT regulations which allowed the setting up of real estate investment trusts. However, it is worth noting that not a single REIT has been established in India as of now. The investors are still analysing tax breaks and waiting for the said instrument to get more attractive.
As per the notification issued by SEBI last week, the new offer document shall contain financial data of the trust for the last three fiscals. This financial data would comprise of balance sheets, data with reference to profits and losses, expenditures, net assets and total returns. Furthermore, the REITs will now have to disclose several other important information including their commitments, liabilities, earnings per unit, total debt, net worth, debt and equity ratios before and after the completion of the issue.
As per the new norms, the trust will now have to state the history of interest and principal payment of REIT and operating cash flow of the last three years projects.
For the information to be provided under related party transactions, the REITs need to disclose transaction data such as details of the related party, their relationship with REIT and the total value of the transaction. For a related party transaction that involves
disposal or acquisition of the trust’s asset, the trust will have to disclose the summary of the valuation report, conditions or obligations related to the said transaction. Moreover, the trust will also have to disclose the commission received by any associate of the party during the said transaction is committed.
The REITs now have to disclose the Management Discussion and Analysis, prepared by an Investment manager against the financial statements. The trust also needs to provide a comparison report of the financial information of the current fiscal with the past two fiscals.
The move by SEBI to issue disclosure norms has come a month later after the security watchdog had stated norms for public issuance of real estate investment trusts. It is worth remembering that back then, SEBI had updated several regulations aimed at making the whole task of raising capital for REIT easier and a lot quicker.
Back in 2014, SEBI had issued notification against REIT regulations which allowed the setting up of real estate investment trusts. However, it is worth noting that not a single REIT has been established in India as of now. The investors are still analysing tax breaks and waiting for the said instrument to get more attractive.
As per the notification issued by SEBI last week, the new offer document shall contain financial data of the trust for the last three fiscals. This financial data would comprise of balance sheets, data with reference to profits and losses, expenditures, net assets and total returns. Furthermore, the REITs will now have to disclose several other important information including their commitments, liabilities, earnings per unit, total debt, net worth, debt and equity ratios before and after the completion of the issue.
As per the new norms, the trust will now have to state the history of interest and principal payment of REIT and operating cash flow of the last three years projects.
For the information to be provided under related party transactions, the REITs need to disclose transaction data such as details of the related party, their relationship with REIT and the total value of the transaction. For a related party transaction that involves
disposal or acquisition of the trust’s asset, the trust will have to disclose the summary of the valuation report, conditions or obligations related to the said transaction. Moreover, the trust will also have to disclose the commission received by any associate of the party during the said transaction is committed.
The REITs now have to disclose the Management Discussion and Analysis, prepared by an Investment manager against the financial statements. The trust also needs to provide a comparison report of the financial information of the current fiscal with the past two fiscals.
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