SEBI Revises Framework for Calculating NDCFs by REITs, InvITs

The Securities and Exchange Board of India (SEBI) has come out with revised frameworks for the computation of Net Distributable Cash Flows (NDCFs) by the Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).[1] The frameworks will be operative w.e.f. April 1, 2024.

This decision has been taken with a view to promote ease of doing business. As per SEBI (Real Estate Investment Trusts) Regulations, 2014 and SEBI (Infrastructure Investment Trusts) Regulations, 2014, a minimum of 90% of the NDCF of the special purpose vehicle (SPV) has to be distributed to the trust in proportion to its holding in the SPV. This is subject to the provisions of the Companies Act, 2013, and the Limited Liability Partnership Act, 2008. The regulations also mandate that a minimum of 90% of the NDCF of the trust has to be distributed to the unit holders. Here, the NDFC amount is arrived after deducting expenses including debt repayment, etc. from the income. The manner in which such NDFC has to be computed at the holding company or SPV level and at the trust level respectively has been provided under SEBI’s master circulars and to standardize the same, the revised frameworks have been rolled out.

The maximum amount that can be retained by SPVs and the trust together would be 10% of the amount arrived at upon deduction of the amount distributed by SPVs (to the trust) from the combined NDCFs of the trust and SPVs.

In the circulars dated December 6, 2023, it is specified that the “trust along with its SPVs needs to ensure that minimum 90% distribution of NDCF be met for a given financial year on a cumulative periodic basis as specified for mandatory distributions” in the REIT and InvIT regulations.