India's Prime Office Stock of Rs 4.5 Lakh Crore Tapped for REITs

India’s commercial real estate market is set to transform with Rs 4.5 lakh crore worth of prime office stock being offered to Real Estate Investment Trusts (REITs), according to a recent report.

ReitsCommercial Real EstateIndiaPrime Office StockReal Estate InvestmentReal Estate NewsDec 03, 2024

India's Prime Office Stock of Rs 4.5 Lakh Crore Tapped for REITs
Real Estate News:India’s commercial real estate market is poised for a significant transformation with the availability of Rs 4.5 lakh crore worth of prime office stock for Real Estate Investment Trusts (REITs). This development, as per a recent Vestian report, is expected to revolutionize the investment landscape in the country.India’s REIT market is currently in its early stages, with only four listed REITs covering an area of 125 million square feet. These REITs operate primarily in the retail and office markets. However, the potential for growth is substantial, as 60% of India’s total Grade-A office space is deemed REIT-worthy. This has made REITs increasingly attractive to both foreign and domestic investors, offering attractive returns in the form of dividends.Since their inception, REITs have distributed Rs 16,800 crore in dividends, surpassing the entire Nifty Realty Index. Despite these impressive returns, the market capitalization of REITs remains relatively low. This low market cap, combined with high dividend yields, presents a significant opportunity for investors.Among the top seven cities, Bengaluru leads the pack with a 33% share of the total REIT-worthy stock. Hyderabad and the National Capital Region (NCR) follow with 21% and 15% shares, respectively. Mumbai and Pune together account for 21% of the REIT-worthy stock, with Chennai holding 10% and Kolkata contributing a mere 1%.The report highlights the increasing focus on sustainability among Grade-A developers, with nearly 67% of the total REIT-worthy stock in India being green-certified. Hyderabad stands out with the highest proportion of REIT-worthy stock, accounting for about 74% of the city’s total office inventory.The future of REITs in India looks promising, as mutual funds and corporations are gradually increasing their stakes in these trusts. Key players like Embassy REIT, Mindspace REIT, Brookfield India REIT, and Nexus Select Trust REIT have generated returns of 24%, 18%, 6%, and 39%, respectively, since their inception.However, it’s worth noting that the BSE Realty Index has provided higher returns (317% in the past 66 months) compared to REITs. Despite this, the positive regulatory environment, better returns on investment, and a rapidly expanding office market are expected to provide a significant impetus to the REITs market in India. Vestian Vestian is a leading real estate analytics and consulting firm, providing insights and solutions to the real estate industry. With a focus on data-driven decision-making, Vestian aims to help investors and developers navigate the complex real estate landscape and capitalize on emerging opportunities.

Frequently Asked Questions

What is the current state of India's REIT market?

India's REIT market is currently in its early stages, with only four listed REITs covering an area of 125 million square feet across the retail and office markets.

How much prime office stock is available for REITs in India?

India offers Rs 4.5 lakh crore worth of prime office stock for REITs, as per a recent Vestian report.

Which cities in India have the highest share of REIT-worthy stock?

Bengaluru leads with a 33% share, followed by Hyderabad (21%), NCR (15%), and Mumbai and Pune together (21%).

What is the significance of green-certified properties in the REIT market?

Nearly 67% of the total REIT-worthy stock in India is green-certified, highlighting the increasing focus on sustainability among Grade-A developers.

What are the key factors driving the growth of REITs in India?

The key factors include a favorable regulatory environment, better returns on investment, and a rapidly expanding office market.

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