Deconstructing India REITs
Growth potential and role of global investors
India’s first REIT has made a good start. How is the REITs market going to pan out?
The performance of the first REIT has put to rest all apprehensions and is likely to lead to the listing of more REITs in India. The success of the first REIT has bolstered the confidence of other developers and investors primarily with commercial office asset portfolio to list their assets under the REIT platform.
What role will foreign institutional investors play in the growth of REITs?
Foreign institutional investors have invested USD 30 bn out of the total Indian real estate investments of ~USD 50 bn from 2005 till date. Major private equity funds, sovereign wealth funds and pension funds have increased their investments in Indian real estate over the years. Some of these funds have formed platform funds / joint ventures seeking an active role in investments. These global investors will play a key role in the growth of the REITs market in India.
Commercial office space offers great scope for REIT worthy assets. What is the potential?
India’s office market with 541 mn sq ft Grade A stock has seen average annual demand of 30 mn sq ft over last 4 years. In 2018, the office absorption has exceeded 33 mn sq ft, with an expectation that the absorption will be even stronger during 2019 with a forecast number of about 42 mn sq ft. The optimistic REIT scenario, with a long-term outlook of gradual growth, makes it imperative to look at real estate assets which are REIT worthy. We have looked at the commercial office space in India as the preferred choice for REIT.