NDCF vs AFFO: which REIT cash-flow metric should you use in India?

NDCF, AFFO, FFO and NOI: the metric map

These measures sit at different levels of the REIT economics, so they should not be used as synonyms.

Nareit defines FFO as a supplemental REIT operating-performance measure that adjusts net income for specified real-estate depreciation, property-sale and impairment effects. Nareit describes AFFO as a further recurring or normalized adjustment to FFO and explicitly says there is no standardized definition of AFFO. [3][4]

SEBI standardized the NDCF framework for Indian REITs, making NDCF the more relevant starting point when the question is how much cash the trust can distribute under Indian rules. [2][1]

Why NDCF matters more for Indian REIT distributions

NDCF is tied directly to the Indian regulatory distribution framework, while AFFO is an analytical convention rather than the statutory payout base.

The SEBI REIT Regulations, last amended on 18 April 2026, remain the governing framework for Indian REITs. SEBI's NDCF circular provides a standardized computation framework, and the regulations require minimum distribution of net distributable cash flows. [1][2]

The Indian REITs Association explains the same chain in investor language: after cash expenses and relevant adjustments, the remaining cash flows are NDCF, calculated under the standardized SEBI framework, and at least 90% is distributed to unit holders subject to the rules. [5]

The DeepScreen REIT Cash-Flow Bridge

Start with rent and property expenses, move through financing and trust-level adjustments, then compare NDCF with the actual distribution.

The point of the bridge is not the numbers. It is the order. NOI tells you how the buildings are performing; NDCF moves closer to the cash available for unit-holder distributions after financing and trust-level adjustments.

Brookfield India REIT's investor presentation provides a real-world example of an NDCF walk-down from revenue and NOI through financing and other adjustments to NDCF per unit and distribution per unit. [6]

Method note: The example is deliberately simplified. Use each REIT's published NDCF reconciliation for actual analysis.

Where does AFFO fit?

AFFO is useful when comparing REITs in markets where it is commonly reported, but it must be read with the issuer's definition.

Nareit's glossary says AFFO typically starts from FFO and adjusts for recurring capital expenditures and non-cash rent items, but there is no standardized definition. Two REITs can therefore report AFFO using different adjustment sets. [4]

For an Indian REIT, DeepScreen treats AFFO as contextual rather than authoritative if the issuer does not report it. We do not manufacture an AFFO number from generic company cash-flow fields and label it as if it were issuer-reported.

What does the 90% NDCF distribution rule actually tell you?

It sets a minimum distribution framework; it does not guarantee a high, stable or growing yield.

SEBI's framework requires minimum distribution of NDCF, and its standardized circular illustrates that the minimum must be satisfied on a cumulative periodic basis for the financial year. [2]

A 90% payout rule does not remove business risk. If occupancy falls, rent growth slows, interest costs rise or refinancing becomes more expensive, NDCF itself can weaken. The payout percentage is therefore only as strong as the cash-flow base underneath it.

How should you test REIT distribution quality?

Follow NDCF per unit and the distribution per unit together, then test whether property operations and the balance sheet can support both.

• • NDCF per unit: is the cash-flow base growing, flat or shrinking over several periods?
• • Distribution per unit: is it supported by recurring NDCF rather than one-off asset sales or unusual financing movements?
• • Occupancy and WALE: do leases provide enough visibility to support future rent collection?
• • Tenant concentration: would losing one or two major tenants materially hit NOI?
• • Leverage: compare LTV or net debt to asset value, interest coverage and debt maturities.
• • Interest-rate exposure: check fixed versus floating debt and near-term refinancing.
• • Capital expenditure: distinguish maintenance capex from expansion or acquisition spending.
• • NAV and cap rate: use compatible valuation dates and realistic NOI assumptions before calling a discount cheap.

Why a high REIT yield can be misleading

Distribution yield rises when distributions increase, but it also rises when the unit price falls. A high yield can therefore be a warning signal rather than a bargain.

A sustainable distribution should be tested against recurring NDCF, property occupancy, lease expiries, debt service and required capital expenditure. Yield without coverage analysis is incomplete.

For valuation, compare the market price with a current NAV estimate and implied cap rate only after checking the valuation date and property assumptions. A discount to stale NAV can disappear when market cap rates move.

Common mistakes in Indian REIT cash-flow analysis

The biggest errors come from mixing accounting, operating and distributable measures that answer different questions.

• • Using PAT as if it were distributable property cash flow.
• • Treating NOI as cash available to unit holders before financing and trust costs.
• • Comparing AFFO across REITs without checking each issuer's definition.
• • Replacing issuer-reported NDCF with a homemade generic free-cash-flow number.
• • Looking at distribution yield without NDCF per unit, leverage and lease quality.
• • Comparing NAV discounts from different valuation dates.