Expect more REITs to hit the market in 2026: CBRE India

India has five listed REITs, with more expected to be listed next year

Real estate consultancy CBRE India's chairman and CEO Anshuman Magazine expects more real estate investment trusts (REITs), covering assets such as offices, malls, and warehouses, to enter the market in 2026, as owners seek a tax-efficient, investor-friendly vehicle for returns.

India has five listed REITs, some backed by major developers, with others floated by big funds such as Blackstone and Brookfield.

"I started talking about REITs in 2002. That was the first time I'd actually organised a real estate conference here with CII. We talked about REITs and I said, there's no direct benefit to us, but I said that was the right thing for the market. It almost took 18 years for the REITs to come in... next year, I'm sure, a few more REITs are coming in. Some of the bigger players, the developers, are consolidating their portfolios," Magazine said in an interview to Moneycontrol.

Unlike India, markets such as the United States have a high degree of REIT penetration, which not only covers office assets but also residential rental housing, warehouses, hospitals and healthcare facilities.

The growth of global capability centres (GCCs) has fuelled demand for premium office space that has led to higher rental yields, making the segment attractive for investors.

While rules were finalised in 2014, it took five more years for the first REIT, Blackstone and Embassy Group-backed Embassy Office Parks REIT, to be listed.

Except the mall asset-backed Nexus Select Trust, all the other REITs largely earn their income from office assets.

Flex space growing

Magazine, a veteran of three decades in the industry,  said that flex and managed spaces are expected to find more takers to keep costs low and grow more nimbly.

CBRE India has advised a number of listed REITs and also worked with most of the listed flex space players.

"They (flex spaces) have got a large chunk of 18 to 20 percent of total office leasing. A lot of the companies want to keep their capex low, and this option not only saves them capex but also gives them flexibility because companies are growing," he said.

He observed that with large Indian corporates expanding their physical presence in more markets, and overseas firms setting up strategic facilities like GCCs hiring rapidly in India, flex spaces have assumed increased importance for firms to scale up.

"In a lot of the other markets, you would hire 200 people, maybe after one year you would hire 10 more, or maybe it could go down to 150. In India, people start with 200 and suddenly within six months they're 400. Flex operators offer that flexibility to say the thing and say if they're hiring quickly, they'll get that many desks quickly," Magazine said.

Flight to quality

Quality of offices has also become paramount for those hiring for roles, with India beating most economies in the world when it comes to enforcing back-to-office mandates.

The "flight to quality" in commercial real estate, as CBRE India detailed in its recent year-end report, comes from the war to attract more talent, Magazine noted.

Even with an increasing number of institutional players and funds holding commercial real estate, a significant part of offices, including in tier-1 and 2 markets, continue to be held by non-institutional landlords. Such holdings often include individual office units, or strata-sold floors.

While monetising such assets can pose a challenge, Magazine said an opportunity exists through small and medium REITs (SM REITs), which can help provide regular rental-earning avenues for smaller owners.

He added that SM REITs can become like properties, mutual fund or market holdings that can be passed down to the next generation.