India's REIT Market Booms with Rs 4.5 Lakh Crore Worth of Prime Office Stock

India's real estate investment trusts (REITs) are poised to transform the commercial real estate landscape with a staggering Rs 4.5 lakh crore worth of prime office stock, according to a recent Vestian report.

ReitsCommercial Real EstateIndiaPrime Office StockSustainabilityReal EstateDec 03, 2024

India's REIT Market Booms with Rs 4.5 Lakh Crore Worth of Prime Office Stock

Real Estate:India's real estate investment trusts (REITs) market is on the brink of a major transformation with a significant influx of prime office stock valued at Rs 4.5 lakh crore. According to a recent report by Vestian, this prime office stock offers a golden opportunity for both domestic and foreign investors, promising attractive returns and sustainable growth.Currently, India's REIT market is still in its early stages, with only four listed REITs covering an area of approximately 125 million square feet. These REITs are spread across retail and office markets. The Vestian report reveals that about 60 per cent of India's total Grade-A office space is REIT-worthy, indicating a vast untapped potential.The popularity of REITs among investors is on the rise, driven by the attractive dividends they offer. Since their inception, REITs have distributed a substantial Rs 16,800 crore in dividends, outperforming the entire Nifty Realty Index. However, despite these impressive returns, the market capitalisation of REITs remains relatively low.Bengaluru stands out as the leader in REIT-worthy stock, accounting for 33 per cent of the total. It is closely followed by Hyderabad and the National Capital Region (NCR) with 21 per cent and 15 per cent shares, respectively. Mumbai and Pune together hold 21 per cent, while Chennai and Kolkata contribute 10 per cent and 1 per cent, respectively.Sustainability is a key focus area in the REIT market, with nearly 67 per cent of the total REIT-worthy stock in India being green-certified. This reflects the growing commitment of Grade-A developers to sustainable practices. Hyderabad, in particular, boasts the highest proportion of REIT-worthy stock, accounting for roughly 74 per cent of its total office inventory.The future of REITs in India looks promising, with mutual funds and corporations gradually increasing their investments. Leading REITs such as Embassy REIT, Mindspace REIT, Brookfield India REIT, and Nexus Select Trust REIT have generated returns of 24 per cent, 18 per cent, 6 per cent, and 39 per cent, respectively, since their inception. While the BSE Realty Index has outperformed REITs with a 317 per cent return over the past 66 months, the report suggests that a favorable regulatory environment and a rapidly expanding office market will provide a strong impetus to the REITs market.In summary, with a robust pipeline of prime office stock and increasing investor interest, the REIT market in India is poised for significant growth in the coming years. This promising landscape offers a unique opportunity for investors to capitalize on the burgeoning commercial real estate sector.

Frequently Asked Questions

What is the total value of prime office stock available for REITs in India?

The total value of prime office stock available for REITs in India is Rs 4.5 lakh crore.

How many listed REITs are there in India currently?

Currently, there are four listed REITs in India.

Which city leads in terms of REIT-worthy stock in India?

Bengaluru leads in terms of REIT-worthy stock in India, with a 33 per cent share.

What percentage of REIT-worthy stock in India is green-certified?

Nearly 67 per cent of the total REIT-worthy stock in India is green-certified.

What factors are driving the growth of the REIT market in India?

The growth of the REIT market in India is driven by a favorable regulatory environment, better returns on investment, and a rapidly expanding office market.

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