Unlocking the Potential of Retail Real Estate: India's First REIT of Retail Assets
India is expected to get its first Real Estate Investment Trust (REIT) of retail assets soon, unlocking the massive value of retail real estate assets and enabling retail participation.
ReitRetail Real EstateShopping MallsInstitutional InvestmentJll IndiaReal Estate NewsJul 14, 2024
REITs, introduced in India a few years ago, aim to attract investment in the real estate sector by monetising rent-yielding assets. Currently, there are three listed REITs on Indian stock exchanges, all of which are of leased office assets. However, with the growing demand for retail spaces, institutional investors and developers are now looking to monetise their rent-yielding space in shopping malls.
According to a report by JLL India, institutional investment in the retail sector has been picking up since 2021, with over USD 862 million invested in the sector. Many global investors are investing in the retail sector either by buying a stake in existing assets or through greenfield development platforms. The report highlights that investors are expecting healthy returns in the long run, considering the growth potential of the sector.
The retail market benefits from favourable demographics, rapid urbanisation, and rising consumption. Investors are looking for quality Grade A assets by established developers having less vacancy. They prefer leased-based assets over strata-sold assets to ensure fair market rentals and timely returns.
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 big institutional players help developers to exit the project partially or fully, reduce their debt, and focus on other developments.
JLL India expects leasing demand in malls to expand and surpass pre-pandemic levels by 2023. 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.
In terms of supply, the stock of Grade A shopping malls in the top seven cities of India is at 90.6 million sq ft in H1 2022. More than 50 per cent of the mall stock is in Delhi NCR (29 million sq ft) and Mumbai (19 million sq. ft). 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.
The launch of India's first REIT of retail assets is expected to be a significant milestone in the growth of the retail real estate sector. It is likely to attract more institutional investment, bring transparency, and improve the operating environment of shopping malls.
Frequently Asked Questions
What is a Real Estate Investment Trust (REIT)?
A REIT is a popular instrument globally that allows individuals to invest in the real estate sector by monetising rent-yielding assets.
How many listed REITs are there on Indian stock exchanges?
There are three listed REITs on Indian stock exchanges, all of which are of leased office assets.
What is the current market scenario of retail real estate in India?
Institutional investment in the retail sector has been picking up since 2021, with over USD 862 million invested in the sector.
What are the benefits of investing in retail real estate?
Investors are expecting healthy returns in the long run, considering the growth potential of the sector, driven by favourable demographics, rapid urbanisation, and rising consumption.
What is the expected impact of India's first REIT of retail assets?
The launch of India's first REIT of retail assets is expected to attract more institutional investment, bring transparency, and improve the operating environment of shopping malls.
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