India's First Retail REIT: A New Era in Real Estate Investment
India is expected to get its first Real Estate Investment Trust (REIT) of retail assets soon, as institutional investors and developers look to monetize their rent-yielding space in shopping malls.
ReitRetail Real EstateInstitutional InvestmentShopping MallsIndiaReal EstateJul 14, 2024
REIT, a popular instrument globally, was introduced in India a few years ago to attract investment in the real estate sector by monetizing rent-yielding assets. Currently, there are three listed REITs - Embassy Office Parks REIT, Mindspace Business Parks REIT, and Brookfield India Real Estate Trust - on Indian stock exchanges, but all these are of leased office assets.
JLL India in its latest report on retail real estate segment highlighted that institutional investment in the retail sector has been picking up since 2021. More than USD 862 million investments have come from 2021 (excluding portfolio deals). Many global investors are investing in the retail sector either by buying a stake in existing assets or through greenfield development platforms.
The retail market seems to benefit from favorable demographics, rapid urbanization, and rising consumption. Investors are expecting healthy returns in the long run, considering the growth potential. 'Investors are looking for quality Grade A assets by established developers having less vacancy. Investors prefer leased-based assets over strata-sold assets to ensure fair market rentals and timely returns,' the report said.
The consultant also mentioned that investment in retail assets is not just limited to metros, as significant activities have been recorded in Tier 2 and Tier 3 cities as well. 'Additionally, investments by these big institutional players help developers to exit the project partially or fully, reduce their debt, and focus on other developments. A lot of foreign funds are willing to acquire quality retail assets yielding good rental income,' the report said.
Investors are either buying or creating portfolios considering future public exit via REITs. 'REITs are still relatively new in India and are prevalent in the office sector. India is expected to get its first retail REIT soon. With quality supply in the pipeline and new malls announced by established developers, the Indian retail sector is expected to attract more institutional investment,' JLL India said.
JLL India cited few examples of institutional investors creating large retail real estate portfolio. Nexus Malls acquired Forum Malls as part of a USD 1.2 billion deal between Blackstone and the Prestige Group to take over the income-generating retail assets of the latter. Abu Dhabi Investment Authority-backed Lake Shore India Advisory has acquired Viviana Mall in Thane from GIC and realty developer Ashwin Sheth Group for over Rs 1,900 crore.
The inherent growth potential of the sector is quite robust, and institutional investment is expected to increase it further. This would bring more transparency and improvement in the operating environment of shopping malls, JLL India said.
JLL India is a leading property consultant that provides comprehensive real estate services to developers, investors, and occupiers. With a strong presence in India, JLL India is well-equipped to navigate the complexities of the Indian real estate market.
Information Real Estate Investment Trust (REIT) is a popular instrument globally that allows individuals to invest in real estate assets. In India, REITs were introduced a few years ago to attract investment in the real estate sector. Currently, there are three listed REITs on Indian stock exchanges, but all these are of leased office assets.
Frequently Asked Questions
What is a Real Estate Investment Trust (REIT)?
A REIT is a popular instrument globally that allows individuals to invest in real estate assets.
How many listed REITs are there on Indian stock exchanges?
There are currently three listed REITs - Embassy Office Parks REIT, Mindspace Business Parks REIT, and Brookfield India Real Estate Trust - on Indian stock exchanges, but all these are of leased office assets.
What is driving institutional investment in the retail sector?
The retail market seems to benefit from favorable demographics, rapid urbanization, and rising consumption, driving institutional investment in the sector.
What is the expected impact of REITs on the retail sector?
REITs are expected to bring more transparency and improvement in the operating environment of shopping malls, and increase institutional investment in the sector.
How many shopping malls are expected to become operational by 2025?
More than 70 shopping malls with a total retail space of 31.02 million sq ft are expected to become operational by 2025 across the top seven cities of India.
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