From Projections to Compliance: Breaking Down SEBI’s New REIT Disclosure Mandates

Posted On - 25 June, 2025 • By - King Stubb & Kasiva

Introduction

SEBI recently issued a circular to review and revise the disclosure of financial information in offer documents and continuous disclosures and compliances by Real Estate Investment Trusts (“REITs”)[1]. This circular revises Chapters 3 and 4 of the Master Circular for REITs, dated May 15, 2024. These revisions stem from recommendations by a Working Group constituted under the Hybrid Securities and Advisory Committee (“HySAC”), inputs from the Indian REITs Association, and internal deliberations. The circular is applicable with immediate effect, except for Chapter 4 requirements pertaining to financial information disclosure for periods beginning on or after April 1, 2025.

Understanding the Circular

Financial Information in Offer Documents (Chapter 3 Revisions)

The revised Chapter 3 provides clear requirements for financial information to be disclosed in offer documents for initial and follow-on offers.

Period and Nature of Financial Statements

Offer documents must include audited financials for the last three years of finance and a stub period, if the latest year audited is over six months before the date of filing. The stub period must be current enough to end within six months of offer filing.

For REITs in follow-on issues that have been in existence for a period of less than three years, disclosures must include their actual duration of existence. First-time offers mandate audited consolidated financials with standalone financials being presented through the REIT’s website.

If a REIT acquires or divests material assets between the last disclosed financial period and the offer filing date, certified pro forma financials will be required to be submitted for the most recent completed year and stub period, based on principles under Section (H).

Content and Basis of Preparation

All such financial data should comply with Indian Accounting Standards (“Ind AS”) and contain the Balance Sheet, Statement of Profit and Loss, Statement of Changes in Unit holders’ Equity, Statement of Cash Flows, and explanatory notes thereto.

Though made in accordance with Division II of Schedule III of the Companies Act, 2013, there are some exceptions. They pertain to non-applicability of loan disclosures to promoters, charge registration, adherence to rules regarding layering of companies, disclosures concerning CSR, and so on.

Statements should give a comprehensive breakdown of ‘Other Income’ and ‘Other Expenses’. The Cash Flow Statement should be done using the indirect method, and Earnings per Unit (“EPU”), in place of Earnings per Share, should be disclosed in follow-on offers. Adjustments for accounting policy changes, prior period errors, and deficiencies in compliance are required.

Materiality of disclosures should be determined based on whether they may affect economic decisions, as determined by the REIT’s Manager.

Additional Financial Disclosures

Offer documents must also include:

  • Project-wise operating cash flows.
  • Statements of contingent liabilities and commitments with updates from the latest available date to the offer filing date.
  • Detailed disclosures on related party transactions, including valuation summaries, interest rates, and commissions.
  • A Capitalisation Statement reflecting debt and equity before and after the issue.
  • A comprehensive debt repayment history.
  • A Statement of Net Assets at Fair Value, including property-wise valuations and reconciliation of book and fair values.
  • A Statement of Total Returns at Fair Value, showing Total Comprehensive Income adjusted for unrecognized fair value changes.

Audit and Certification

All financial disclosures must be audited by ICAI peer-reviewed statutory auditors appointed per REIT Regulations. The auditor’s report must follow ICAI’s ‘Guidance Note on Reports in Company Prospectuses’[2] and include opinions on the true and fair presentation of each financial statement.

Projections and Management Discussion & Analysis (MDA)

For follow-on offers, projections are required to be disclosed for assets/projects to be acquired out of the offer proceeds. These projections should comprise:

  • Project-wise revenue and operating cash flows.
  • Underlying assumptions, certified by both the statutory auditor and the Manager, in line with SAE 3400.

REITs must also disclose a Management Discussion and Analysis (“MDA”), comparing the latest financial data with the previous two years. The MDA must discuss:

  • Business operations, financial highlights, and key risks.
  • Factors affecting operations and revenue streams.
  • Post-year developments, including any likely material impact.
  • Analysis of changes in income/expenditure.
  • Segment-wise turnover, business seasonality, and asset/client concentration.

Other Offer Document Disclosures

Offer documents must also include:

  • Manager’s statement on working capital sufficiency for at least 12 months post-listing.
  • Market performance of traded units since the last reporting period.
  • Key Managerial Personnel profiles and unit holdings.
  • Basis for issue pricing and any alternate financing arrangements.

Financials of Manager and Sponsor(s)

Audited consolidated financials of the Manager and Sponsors for the last three years, consistent with applicable Indian accounting standards, are required. Exceptions are made for entities making transitions between various standards and foreign entities applying IFRS.

Framework for Net Distributable Cash Flows

The Net Distributable Cash Flows (“NDCF”) framework applies to the Trust level and all HoldCos/SPVs. It includes:

  • Operating cash flows, treasury income, and proceeds from asset sales.
  • Deductions for finance costs, debt repayments, required reserves, and capital expenditure.
  • Clarifications on maximum retention limits (10%), treatment of surplus cash, and non-allowability of distributions from borrowings.
  • Uniform application across all levels of the REIT structure, and consistency in distribution frequency as per the disclosed policy.

Combined and Pro-forma Financial Statements

Combined financial statements must treat all REIT assets as part of a single group and eliminate intra-group transactions. ICAI’s ‘Guidance Note on Combined and Carve-Out Financial Statements’ applies[3].

Material acquisitions/divestments (≥20% impact on turnover/net worth/PBT) require proforma statements, certified by peer-reviewed professionals. Voluntary disclosures for non-material deals and pre-period acquisitions are also allowed.

Follow-on Offer Specific Requirements

Follow-on offer documents must meet Schedule III REIT disclosure norms and include:

  • Detailed description and valuation of new assets.
  • Summarized audited financials of the acquired assets.
  • Title, litigation, regulatory action disclosures.
  • Risk factors and other material information.
  • Full valuation reports of assets being acquired.

Disclosures are also required for any SEBI show-cause notices, prosecutions, or settlement orders in the past three years.

Continuous Disclosures and Compliances (Chapter 4 Revisions)

REITs must comply with stringent periodic disclosure norms to stock exchanges.

Financial Results

Quarterly and half-yearly disclosures must include:

  • Consolidated and standalone Profit and Loss Statements.
  • Assets and Liabilities, Cash Flows, Changes in Unitholder Equity.
  • Net Assets and Total Returns at Fair Value.
  • Statement of NDCF, to be submitted when distributions are made.

Comparative figures for the previous year/half-year are mandatory unless the REIT did not exist.

Disclosure Standards

Disclosures should all be Ind AS and Schedule III format compliant (subject to REIT-specific exceptions). Capital repayment in nature of distributions should be disclosed as a separate negative item under Equity.

Additional Mandatory Disclosures

  • Manager fees, including justification, methodology, and significant changes.
  • Changes in accounting policies and impacts of audit qualifications must be clearly disclosed.
  • Net Borrowings Ratio and supporting breakdown (type of borrowings, deferred payments, REIT asset valuation).
  • Annual audit of all financials and mandatory limited review for unaudited non-annual information.

Governance, Compliance, and Transparency

  • Board/Governing Body of the Manager approval of financial disclosures is required.
  • Certifications by CEO and CFO provide assurance of non-misleading, accurate presentations.
  • Authorized representative signatures are required.

Credit Ratings and Borrowings

Credit ratings in accordance with Regulation 20(2) of the REIT Regulations should be reviewed periodically and filed with exchanges within 30 days after the end of the financial year.

REITs are also required to disclose:

  • Borrowing-related ratios (e.g., debt-equity, asset cover, DSCR).
  • Distribution per unit, net profit margins, and lender-wise exposure.
  • Explanation of modified audit opinions impacting debt servicing ability.

Website and Investor Grievance Redressal

REITs must maintain an updated website containing business details, financial reports, contact details, and all public disclosures. They must also be registered with SEBI’s SCORES platform and maintain mechanisms for prompt grievance resolution.

Conclusion

SEBI’s revised circular sharpens disclosure obligations for REITs by enforcing consistency in financial reporting, mandating detailed audit-backed transparency, and aligning operational metrics with investor expectations. The emphasis on NDCF clarity, unified disclosure formats, and robust compliance timelines enhances investor trust and accountability. These measures collectively aim to create a more predictable and transparent ecosystem for REITs, ensuring stakeholders have access to timely, relevant, and decision-useful information across all stages of a REIT’s lifecycle.