Enhancing Transparency: Recent Improvements in REIT and InvIT Disclosures

In a big move to build trust and protect investors, India’s market regulator, SEBI (Securities and Exchange Board of India), has rolled out a set of new rules for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). These changes aim to make financial reporting clearer and bring Indian practices closer to international standards. Bottom line? It’s about making things easier for investors and businesses alike.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

What’s New in the Rulebook?

1. A Clearer Way to Share Cash (NDCF):

Until now, REITs and InvITs have been unable to calculate how much distributable cash (NDCF) they have in their way, leading to confusion. Starting April 1, 2024, that changes. SEBI now requires all trusts to follow the same rules when calculating NDCF, both at the trust level and for their holding companies or subsidiaries. At least 90% of this distributable cash must be shared with unitholders.

2. Better Financial Disclosures:

SEBI is tightening the screws on financial reporting. From now on, REITs and InvITs must publish complete, combined financial statements when going public, no matter how long they’ve been in operation. For follow-up fundraisers, they must present complete audited statements and share links to individual audit reports on their websites. Also, the option to show only condensed statements is off the table, keeping everything in line with broader disclosure regulations.

3. Quarterly Updates on Fund Use:

Investors won’t have to wait half a year to determine how trusts use their borrowed funds. SEBI has bumped the reporting frequency every quarter, so any missteps or updates will be communicated faster and more transparently.

4. Must-Share Financial Ratios:

Trusts with outstanding borrowings must disclose key financial ratios, like their net borrowing ratio, in their regular results. This gives investors a better read on how financially healthy (or stretched) a trust might be.

SEBI Wants Your Feedback

SEBI’s not doing this in a vacuum. They’ve opened the floor for public feedback until March 7, 2025. Whether you’re an investor, analyst, or industry player, you can share your thoughts through their online form. This kind of dialogue helps ensure the final rules strike the right balance.

What This Means for Investors and the Market

• More Confidence: With more frequent and detailed updates, investors will have a clearer view of how these trusts are performing and what risks might be involved.
• Global Appeal: The reforms align Indian REITs and InvITs with global practices, potentially attracting more international money into the space.
• More Room for Mutual Funds: SEBI is also considering doubling the amount of equity mutual funds can invest in REITs and InvITs, from 10% to 20%. Debt funds will still be capped at 10%, but this change could help more capital flow into the sector and diversify the investor base.

Wrapping It Up

SEBI’s updated disclosure rules are more than red tape; they’re a step toward a more transparent, efficient, and investor-friendly real estate and infrastructure market. SEBI lays the groundwork for long-term growth and investor trust in these essential investment vehicles by tightening reporting standards and encouraging more openness.