The Securities and Exchange Board of India, on 07th May 2025 issued a circular to review and revise the norms for enhanced disclosure of financial information in offer documents and other disclosures for Real Estate Investment Funds (REITs). These revisions aim at enhancing transparency, bolster investor protection and improve the ease of compliance requirements for REITs.
REITs are pooled investment vehicles which offer individual investors an opportunity to participate in the real estate market, just like mutual funds. The market of REITs is rapidly growing in India with more than Rs. 90,000 crores net asset being managed by four listed REITs as on 30th September 2023. The trusts own the real estate properties on behalf of the unit-holders and the management company is responsible for managing the real estate portfolio. The REITs are under the regulatory authority of the SEBI. The SEBI Master Circular for REITs was issued on 15th May 2024 and the recent circular of 07th May introduces important amendments, particularly affecting Chapter 3 and 4 of the Master Circular.
The Circular has mandated that all REITs must disclose certified proforma financial statements of any material acquisition or divestment of assets in the offer document if it was undertaken post the latest period for which financial information was disclosed. The proforma statements must cover at least the last complete financial year and any interim period, if applicable. The circular is applicable for both Initial Public Offers and follow-on offers.
Further, the Circular also reduces the burden of repetitive reporting by allowing REITs to refer to previously published financial information already submitted under applicable regulations. Moreover, REITs which have been in existence for less than three years are required to submit audited financial statements of all the available years along with any interim period.
In regards to Chapter 4 of the Master Circular, the recent circular mandates that both REITs and InvITs (Infrastructure Investment Trusts) have to submit quarterly and year-to-date financial results to the stock exchange within 45 days from the end of the quarter and for the last quarter, annual financial statements must be submitted within 60 days. Further, they are mandated to report their unit holding pattern one day prior to listing, quarterly within 21 days and within 10 days of any capital restructuring that leads to a change exceeding two percent in the total outstanding units.
SEBI has further mandated that project-wise operating cash flows, contingent liabilities and commitments as of date of the latest financials must also be included in the disclosure statements.
These regulatory revisions aim to align disclosure requirements for REITs at par with SEBI’s ICDR and LODR Regulations. The regulations would increase the compliance costs upon the REITs for more detailed reporting, audited proforma financials and asset-level statements. However, it is hoped that greater transparency in reporting and disclosures would increase confidence and bolster market participation, leading to increased investment in REITs, both domestically as well as through foreign investors.