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CS Professional · Strategic Management and Corporate Finance · Real Estate Investment Trusts

Under the SEBI (Real Estate Investment Trusts) Regulations, 2014, which statement about distribution of cash flows by a REIT to its unitholders is correct?

A REIT must distribute at least 90% of its net distributable cash flows to unitholders. The rule ensures investors receive most of the rental and other income, and distributions must be made at least half-yearly, not left to the manager's discretion.

  1. AAt least 90% of net distributable cash flows of the REIT must be distributed to unitholdersCorrect
  2. BAt least 51% of net distributable cash flows must be distributed
  3. CDistribution is entirely at the discretion of the manager with no minimum
  4. DAt least 90% of net distributable cash flows must be distributed, and only once a year

Explanation

The REIT Regulations require the REIT to distribute not less than 90% of net distributable cash flows to unitholders. The 51% figure is wrong and there is a minimum, so discretion is not complete. Option 4 adds a once-a-year condition; the regulations require distribution at least on a half-yearly basis, so it is incorrect.

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