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The Indian commercial real estate market is estimated to provide 294 million square feet of REITable space from the existing office stock.
According to JLL, these REITable assets would be valued at $35 billion. Rising transparency levels, progressive regulations, and a robust commercial real estate market in the country have made the segment a favourite among institutional investors.
Investors have allocated nearly $17 billion in the form of direct investments as well as through entity level investments from 2006 to 2019 in the office space, it said.
JLL on Wednesday released its latest report titled ‘India REITs - Heralding a new era in real estate investments’.
India has already seen its first REIT listing from the Embassy Group-Blackstone joint venture in March this year. With a portfolio of 32.6 million square feet, the listing is also Asia’s largest in terms of area, the report said.
Ramesh Nair, CEO & Country Head, JLL India said: “The listing of India’s first REIT heralds the institutionalisation of real estate assets and indicates enhanced maturity and professionalism in the real estate market. Growing knowledge of REITs will ensure acceptability and a gradual increase of interest from retail investors. We expect to see other asset classes such as retail, warehousing and hospitality also offering REITable assets in the time to come.”
Bengaluru tops in REITable space
The report states with 33 per cent share of REITable space, Bengaluru will provide the highest REITable assets totalling 97.8 million square feet, worth $10.7 billion. Mumbai follows Bengaluru with 17 per cent share of the total REITable space at 49.7 million square feet worth $8.6 bn. Delhi-NCR and Chennai follow Mumbai, both in space and value terms.
With large and quality IT spaces occupied by prominent global players, Bengaluru will be the most favoured city for REITable assets. Presence of single-ownership ready properties makes it easier to aggregate the assets and manage them for REITs.
Emergence of new office space occupiers, continued demand from IT/ ITeS, global in-house centres, along with BFSI space is expected to keep office space demand robust over the next three years.
Samantak Das, Chief Economist and Head of Research & REIS, JLL India said, “Indian office space holds the potential to offer an additional 101 million square feet of office space for REIT from the new office completion expected during 2019-21. This could help upcoming REITs to gain from an upside in rentals as well as capital appreciation. While the strong institutional flow of funds into real estate will continue to provide initial momentum towards REITs’ growth in the country, active participation of insurance and pension funds in future will help in long-term growth of the market.”
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