The much awaited Real Estate Investment Trust (REIT) listing is inching closer to reality and India has rent- yielding office inventory of 537 million sq ft worth over $70 billion.
According to a joint report by KPMG, Naredco, Hariani & Company and Knight Frank, titled ‘REIT-able Space in India: A Closer Reality’, $121 billion or 1.73 billion sq ft occupied commercial real estate across office, retail and warehouse segments could potentially benefit from the REIT opportunity
According to the report, the Indian real estate market, which is supported by a strong economic growth, a large portfolio of completed commercial real estate projects and a conducive investment climate, offers a big opportunity for REITs.
In the case of office and retail, approximately 537 million sq ft and 75 million sq ft respectively is REIT-able area located in the top seven cities of Mumbai, NCR, Bengaluru, Chennai, Hyderabad, Kolkata and Pune. In the case of warehousing space, the all-India estimate is approximately 1,127 mn sq ft.
Globally, the return on equity traded REIT has bettered that from leading stock markets indices over the past 10 years. The five-year returns for REITs ranged between 7 and 16 per cent globally. With Japanese and Malaysian markets providing returns of 8-10 per cent, expectations from Asian economies are on the rise In Asia, REITs debuted in Japan followed by Singapore, Indonesia, South Korea. Japan and Singapore are the market leaders in Asia for REITs. More than 20 countries now have REITs or a similar structure. Since, its birth in the US close to five decades ago, the REIT market has mushroomed across the globe.
Rajeev Bairathi, ED and Head of Capital Markets, Knight Frank India, said: “While on the one hand, REIT would help developers unlock value from their leased out assets and generate much needed capital, it would also provide a much needed entry and exit vehicle for the global institutional investors looking to invest in non-residential real estate assets in India.”
Ameet Hariani, founding & Managing Partner, Hariani & Company said, “Indian REITs will help to split the bill on real estate investments. Developers divesting through REITs can get in and out of developments quickly. Investors can also make lower-ticket investments in property through REITs. Last year saw a considerable easing up of Indian REIT regulations. It’s time for investors, developers and owners to get in on the REIT action.”