Regulation 19 - Related party transactions - Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014

Related party transactions 19. (1) All related party transactions shall be on an arms-length basis, in the best interest of the unit holders, consistent with the strategy and investment objectives of the REIT and shall be disclosed to the designated stock exchange and unit holders periodically in accordance with the listing agreement and these regulations. (2) A REIT, subject to the conditions specified hereunder, may,- (a) acquire assets from related parties; (b) sell assets or securities to related parties; (c) lease assets to related parties; (d) lease assets from related parties; (e) invest in securities issued by related parties; (f) borrow from related parties. (3) With respect to purchase or sale of properties 1 [***] after initial offer,- (a) two valuation reports from two different valuers, independent of each other, shall be obtained; (b) such valuers shall undertake a full valuation of the assets proposed to be purchased or sold as specified under regulation 21; (c) Transactions for purchase of such assets shall be at a price not greater than, and transactions for sale of such assets shall be at a price not lesser than, 2 [one hundred ten percent and ninety percent of the] average of the two independent valuations 3 [, respectively]. (4) In case of any related party transactions entered into prior to making the initial offer,- (a) adequate disclosures to that effect shall be made in the initial offer document including a consolidated full valuation report of all such assets 4 [***]; (b) the REIT shall enter into proper and valid agreements with such related parties at the price or interest rate or rental value mentioned in the initial offer document; (c) If the transactions are conditional upon the REIT receiving a minimum amount of subscription, adequate disclosures shall be made in the offer document and the agreements to that effect. (5) In case of any related party transactions entered into after the initial offer,- (a) adequate disclosures shall be made to the unit holders and to the designated stock exchanges; (b) in case,- (i) the total value of all the related party transactions, in a financial year, pertaining to acquisition or sale of properties 5 [, whether directly or through holdco and/or SPVs,] or investments into securities exceeds ten per cent. of the value of REIT; or (ii) the value of the funds borrowed from related parties, in a financial year, exceeds ten per cent. of the total consolidated borrowings of the REIT 6 [, holdco and/or SPVs]; approval from the unit holders shall be obtained prior to entering into any such subsequent transaction with any related party; (c) for the purpose of obtaining approval for such transactions, the manager shall obtain approval from unit holders in accordance with regulation 22 and request for such approval shall be accompanied by a transaction document. (6) The disclosures in the offer document and transaction document shall include the following, as may be applicable,- (a) identity of the related parties and their relationship with the REIT or parties to the REIT; (b) nature and details of the transactions entered into or proposed to be entered into with such related parties including description and location of assets; (c) the price or value of the assets or securities bought or sold or leased or proposed to be bought or sold or leased and if leased or proposed to be leased, value of the lease; (d) ready reckoner rate of the real estate asset being bought or sold: Provided that where such ready reckoner rate are not available, property tax assessment value or similar published rates by Government authorities shall be disclosed; (e) summary of the valuation report(s); (f) the current and expected rental yield; (g) if the transactions are conditional upon the REIT receiving a stated amount of subscriptions, the minimum amount of such subscriptions to be received; (h) amount of borrowing and rate of interest in case of borrowing from any related party; (i) any other information that is required for the investor to take an informed decision. (7) With respect to any properties leased to related parties to the REIT, both before and after initial offer, if,- (a) such lease area exceeds twenty per cent. of the total area of the underlying assets; (b) value of assets under such lease exceeds twenty per cent of the value of the total underlying assets; (c) rental income obtained from such leased assets exceeds twenty per cent of the value of the rental income of all underlying assets, a fairness opinion from an independent valuer shall be obtained by the manager and submitted to the trustee and approval of unitholders in accordance with regulation 22 shall be obtained. (8) For any related party transaction requiring approval of the unit holders or proposed to be undertaken immediately after the initial offer, the agreement shall be entered into within six months from date of close of initial offer or from date of approval of the unit holders, as the case may be: Provided that in case of the agreement is not entered into within such period, approval from the unit holders may be sought for extension for another six months in accordance with regulation 22 with the updated valuation report(s). (9) Adequate disclosures of all related party transactions that have been entered into prior to the follow-on offer shall be made in the follow-on offer document. (10) Transaction between two or more of the REITs with a common manager or sponsor shall be deemed to be related party transactions for each of the REITs and provisions of this regulation shall apply: Provided that this sub-regulation shall also apply if the managers or sponsors of the REITs are different entities but are associates. (11) With respect to any related party transaction, details of any fees or commissions received or to be received by 7 [such] related party 8 [(ies)] shall be adequately disclosed to the unit holders and to the designated stock exchanges. (12) No related party shall retain cash or other rebates from any property agent in consideration for referring transactions in REIT assets to the property agent. (13) Where any of the related parties has an interest in a business which competes or is likely to compete, either directly or indirectly, with the activities of the REIT, the following details shall be disclosed in the offer document,- (a) details of the such business including an explanation as to how such business shall compete with the REIT; (b) a declaration that the related party shall perform its duty in relation to the REIT independent of its related business; (c) declaration as to whether any acquisition of such business by the REIT is intended and if so, details of the same thereof. (14) Any arrangement or transaction or contract with any related party other than as included in this regulation shall be disclosed to the unit holders and to the designated stock exchanges. ************** NOTES:- 1 Omitted both prior to and by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 2 Inserted by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 3 Inserted by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 4 Words, figures and symbols in accordance with clause (a) of sub-regulation (3), as may be applicable omitted by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2017, w.e.f. 15.12.2017 5 Inserted by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 6 Inserted by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 7 Substituted any person or entity which is an associate of the by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 8 Inserted by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016