India’s Real Estate Investment Trust (REIT) market is steadily progressing from a “Nascent” to “Early Growth” stage, with close to 140 million sq ft of real estate assets including office and retail spaces already getting listed. According to Colliers’ latest report, REITs Unlocked: Accelerating India’s Real Estate Maturity, the four listed office REITs currently encompass close to 133 million sq ft of Grade A office space. Additionally, about 371 million sq ft of office assets, accounting for about 46% of the existing Grade A stock, can potentially come under future REITs.
Amongst the top seven cities, Bengaluru accounts for the bulk of additional REITable stock with a share of 24%, followed by Hyderabad at 19%. Furthermore, existing REITs have around 34 million sq ft of under construction supply and this is likely to become operational in the next 1–2 years. Overall, Indian REITs continue to pick pace, especially in the office sector, supported by new listings, broadening of occupier base and growing institutionalization in the segment.
“Office REITs in India are at an early growth stage, with approximately 16% of Grade A stock already listed on the equity markets. An additional 371 million sq ft of office space can come under future REITs, much of which is concentrated in SBDs across the top seven markets. Rising demand from Global Capability Centers (GCCs) along with space uptake by technology & BFSI firms is driving occupancy levels. This in turn is expected to accelerate the growth of office REITs in India. For developers and investors, SBDs offer a significant opportunity to capitalize into these high-demand areas, unlocking value and driving long-term growth for their REIT portfolios,” says Badal Yagnik, Chief Executive Officer, Colliers India.
Globally, REITs across APAC, Europe & America have expanded into multiple assets such as office, retail malls, industrial warehouses, hospitals, residential apartments, data centers etc. Currently, Japan and Singapore are relatively established REIT markets in the APAC region with investors having access to a diverse set of underlying real estate assets. However, REITs/ Infrastructure Investment Trust (InvITs) market in India is relatively smaller in scale and have listed office, retail and warehousing portfolios within the trusts. The regulatory environment in India is strong and REITs can ultimately expand to newer asset classes. Interestingly, SEBI has been championing the case for Small and Medium Real Estate Investment Trusts (SM-REITs) in recent years.
“The momentum of REITs in India is steadily gathering pace, fueled by rising investor confidence and growing focus on institutionalization of real estate. Diversification of REITs into different asset classes over the last few years and recent listings have enhanced the participation of retail investors. Office REITs, in particular have performed well and currently have a market penetration of around 16%. With strong fundamentals in play, 25–30% of the overall office stock in India can potentially come under REITs by 2030,” says Vimal Nadar, Senior Director & Head of Research, Colliers India.
