The Securities and Exchange Board of India (Sebi) on Thursday tightened disclosures norms for real estate IPOs. In a move that could affect some high-profile IPOs planned by big developers, Sebi has said that claims about land bank details should be accompanied by details of the ownership status and the agreement to purchase of the land. Sebi hopes this would prevent firms from exaggerating their real assets.

“No projection of the land value or project value must be given and any indication of the market value should only be at present value,” Sebi chairman M Damodaran said.

Mr Damodaran added that the market valuations of land banks has to be based on the current valuation of the land and not on future projections. He added that continuous disclosures would be required post-IPO.

The market regulator has also made mandatory complete disclosure of the details of the land bank including the existence of revocation clause. All such agreements are to made available for inspection, the Sebi chairman said on Thursday.

ET on Thursday had reported that the land bank valuation projected by real estate firms are under the review of the market regulator and many domestic real estate companies are jacking up valuations, thereby creating a hype about land banks they owns. Property consultants eager to make a quick buck and not wanting to miss out on a hot growth sector are willing to oblige, ET had reported.

Investors can now take much better decisions on valuation of real estate IPOs. The new diktat will discourage companies with fraudulent intentions from tapping the capital market.

Meanwhile, Sebi has made it mandatory for all companies planning IPOs (which would include all real estate companies too) to get rated by agencies.

The new Sebi norms could affect some high-profile IPOs being planned by big developers, merchant bankers feel. Real estate firms like DLF, Omaxe, HDIL, Puravankara and IVRCL Prime have filed IPO prospects with Sebi.
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