About 60 per cent of India’s total Grade-A office space, worth Rs 4.5 trillion, can be included in real estate investment trusts (REITs), according to a report by Vestian.
City-wise, among India’s top seven cities, Bengaluru leads the pack with a 33 per cent share of the total REIT-worthy stock. It is followed by Hyderabad and NCR with 21 per cent and 15 per cent shares, respectively. While Mumbai and Pune together account for 21 per cent of India’s REIT-worthy stock, Chennai holds 10 per cent and Kolkata contributes a mere 1 per cent.
According to the report, the majority of REIT-worthy assets are concentrated within the commercial hubs of these cities, driven by the presence of branded Grade-A office buildings in these prime locations.
However, the report noted that India’s REIT market is currently at a nascent stage compared to major global economies, with only four listed REITs, covering an area of 125 million square feet (msf) across the retail and office markets.
The REITs’ market capitalisation is about 13.7 per cent of the total listed real estate sector in India. The capitalisation is low compared to mature markets such as the USA (98.9 per cent), Australia (94.8 per cent), and the UK (92.5 per cent).
Additionally, according to the report, Embassy REIT, Mindspace REIT, Brookfield India REIT, and Nexus Select Trust REIT generated returns of 24 per cent, 18 per cent, 6 per cent, and 39 per cent, respectively, since their inception.
With such a vast amount of available Grade-A office stock, experts at Vestian believe that the upside potential of REITs can transform the commercial real estate investment landscape.
