India REITs: Heralding a New Era in Real Estate Investments

Will REITs start a new era of real estate investments in India?

India witnessed the launch and successful listing of its first Real Estate Investment Trust (REIT) by Blackstone and Embassy in March 2019. This key event marked the opening of a fresh investment avenue and unfolded a bright new chapter for the country's real estate sector. REITs give retail investors an opportunity to invest in commercial properties which was until now only a dream. The report analyses the factors that will influence the growth of REITs in India.

Embassy Office Parks REIT: Snapshot

Portfolio of 32.6 mn sq ft comprising 24.2 mn sq ft completed and 2.9 mn sq ft under construction office space plus a proposed development area of 5.5 mn sq ft.

Is India expected to witness REITs market growth in line with global trends?

REITs originated in 1960 in USA and were adopted in 35 countries thereafter. It has become an alternate investment instrument with global value exceeding USD 1.7 tn in 2018. This growth has been driven by returns higher than equity markets over the long term. Since this is a new product in India, we have analysed and shared factors that influenced its evolution across the globe through this report.

How much Indian office space is REIT worthy today?

A detailed analysis of the office market based on asset ownership, size of the property, leased space and asset quality has been used to arrive at REITable office space. In order to arrive at the REITable assets in India, the focus has been on low hanging fruits in terms of single ownership, larger floor space with good occupancy rates.

JLL research indicates that 294 mn sq ft* of office, space stock would be eligible for REIT. This would translate to potential investment of USD 35 bn*

Bengaluru to lead REITable office space share 

Source: JLL Research

How will REITs change Indian Real estate scenario?

• The listing of India’s first REIT heralds the institutionalisation of real estate assets and indicates increased maturity of real estate markets
• Growing knowledge of the product will ensure acceptability and gradual increase of retail interest in this segment
• The instrument will enable retail investors to partake of the massive opportunity in the commercial markets real estate pie, which until now was only a dream

^{*Indicates REITable asset from stock as on 2018 and includes Embassy Office Parks REIT.}