India office REITs - Off to a great start

The listing of REITs in India has provided a mutual fund-like investment option in real estate. Traditionally, retail investors resorted to direct investment in the real estate space with challenges, which are addressed by the introduction of listed REITs in the recent years. REITs provide diversification across asset classes and geographies, an opportunity to invest in real estate properties in smaller denominations through organised and formal platforms, lower transaction costs, tax savings, easy liquidity and access to professional expertise coupled with transparency and accountability.

Greater transparency, liquidity and robust rent-yielding asset portfolios of Indian REITs have been successful in attracting global capital as witnessed in the previous three listed REITs. While REITs have been driven by India’s strong office demand and positive outlook, it is time to see more REITs being introduced across other asset classes such as retail, logistics, hospitality etc. Policy measures have supported the REIT market to thrive and with over 50% of India’s Grade A office stock considered REITworthy, we anticipate the market to grow further.

In India ~10% of the total Grade A office stock is under REITs - indicating a huge potential for REITs as the market moves towards maturity. Of the current four listed REITs, three are primarily commercial office assets led. Their market capitalisation is a small fraction of the total available REITworthy commercial office opportunity. Grade A office markets in India account for the largest share of institutional investments till date. The office market is estimated to provide an investment opportunity of USD 59-63 billion through the listing of new REITs.