Sebi against futuristic valuation of real estate

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Market regulator, the Securities and Exchange Board of India (Sebi), is against real estate companies giving futuristic valuation of land with them in their draft prospectus for public offers, a move that could affect the fortunes of many realty firms. 
 
"There should not be any disclosure of land values based on the future developed value of the land," Sebi said in a note on IPOs by real estate companies. As of February 14, there are seven draft offer documents of real estate companies filed with Sebi. These issues are likely to raise an estimated Rs 17,400 crore from the market. 
 
"While on one hand, a string of issues by real estate companies reflects on the ability of Indian primary market to support such huge need for funds, on the other hand, it also perhaps reflects on a tendency on the part of issuers to ride on the real estate boom, thereby pointing to need for overall caution," the note said. 
 
It was in this context, Sebi said, that a need was felt for a closer scrutiny of disclosures by such companies, especially relating to land bank and its valuation. According to Sebi, disclosures by real estate companies show that there were no standards. At times, valuations include certain futuristic assumptions. While in some cases there are valuations, in some others there is no valuation, reports Business Standard.