Mumbai: For a while now, IPOs from real estate companies have been hanging in a limbo. All this because Sebi has been working on a new set of rules that govern how these companies make disclosures in their offer documents. Now, it seems, Sebi plans to extend these rules to companies that value real estate players and make them liable to investors for the valuation reports they put out.
If this proposal is eventually accepted, companies like Knight Frank, Cushman and Wakefield, Jones Lang Lasalle Property Consultants and CB Richard Ellis will have to register with the regulator before their valuation certificates are accepted as standard documents in IPO filings.
The regulator has also been advising merchant bankers to ensure that valuers are termed an expert as explained under Section 58 of Companies Act, 1956, so that such valuers become liable to investors under the current laws. Although Sebi Committee on Disclosures and Accounting Standards (SCODA) has proposed, among other valuation parameters, registration of these real estate consultants and valuers, the board is yet to take a decision.
The rule changes already accepted by the Sebi board would make it compulsory for some realty companies to disclose details like sources of funds, amount paid during agreement, the contracting parties, etc.
Very soon, Sebi is expected to communicate to market intermediaries a new set of rules relating to valuation of all the land that real estate companies claim form their land bank. The regulator’s board has already given the nod for categorising land banks under different heads like owned, agreed to purchase, agreements for development, etc.
What is interesting is that Sebi’s new rule would bar companies from including values of such deals which contain a revocation clause. “Where an agreement contains a revocation clause, such an agreement shall not be included for purposes of valuation and disclosure in the offer document under law,” SCODA had proposed to Sebi board.
In case realty firms have entered into an agreement for purchase or development of land, the new rules would require disclosures like identity of the contracting parties, agreement value, amount paid against agreement (in terms of percentage and absolute value) and sources of funds.