Fund raising by Infrastructure Investment Trusts (InvITs) have fallen significantly in FY25 so far compared to last year partly due to lower awarding of road projects and partly because of regulatory delays in the transfer of assets to InvITs from parent entities and others.

Real estate investment trusts (REITs) however, have kept their fund-raising momentum more or less intact as they are busy adding to their portfolio.

Most InvITs in India have roads as their underlying assets, while, of the four REITs in the country, three have office assets as the underlying assets and the fourth comprises malls.

According to data sourced from Prime Database, in FY25 year to date InvITs have raised ₹24536 crore compared to ₹44188 crore in FY24. Funds raised via equity in FY25 have so far been ₹11088 crore, compared to ₹34423 crore in FY24, the data showed. Funds raised via debt at ₹13448 crore have already surpassed last fiscal’s total of ₹9765 crore.

When clubbed together the funds raised by REITs and InvITs so far in FY25 is just under 60 per cent of that raised in entire FY24.

Assets under management of InvITs were at ₹5.4 lakh crore in FY24-end, up by a fourth on year, according to CareEdge Ratings, while office REITs account for a tenth of the total Grade A office space in the country.

InvITs

Fund raising activity has moderated in FY25 pending transfer to InvITs of toll roads and HAM projects with enterprise value of ₹20,000 crore awaiting clearance, said Rajashree Murkute, Senior Director, CareEdge Ratings.

Lower project awarding in roads last year and this year so far is not expected to have an immediate impact on assets transfer to InvITs over the next 2-3 years, she said. Monetisation potential of road InvITs, estimated at ₹2 lakh crore over next two years, will be driven by transfer of operational toll roads to NHAI InvIT, upcoming TOT projects, change in hands of mature toll projects and operational hybrid annuity model projects.

“Despite significant monetisation potential, the valuation multiples and investor appetite due to perceived risk in quality of construction of roads need to be closely monitored,” Murkute said.

Mature toll roads constitute a lion’s share in AUM of roads with more than half of the assets being toll road assets, followed by HAM assets at around 25 per cent.

Debt is being favoured partly because equity is a more time consuming process and also due to existing leverage being lower than the threshold of 49 per cent of enterprise value in both InvITs and REITs. Annuity cash flows also increase their financial flexibility.

REITs

REITs have expanded their total area by around 10 per cent in first half of FY25. They are using the proceeds of their funds either to fund acquisition or to reduce debt that will create headroom to acquire more assets.

For instance Embassy Office Parks REIT raised ₹2500 crore in April to part fund its acquisition of a tech park in Chennai. This month Brookfield India Real Estate Trust raised ₹3500 crore to reduce leverage.

“Outlook for InvITs and REITs is favourable over next two years on the back of strong asset monetisation pipeline for roads, commercial real estate and transmission sector,” said Murkute.

Published on December 15, 2024