From an investor standpoint, the REIT product is a must-have in any portfolio, said Sharad Mittal, CEO at Motilal Oswal Real Estate Fund.
Mindspace Business Parks REIT's initial public offering has subscribed 38 percent on July 27, the first day of bidding.
The public issue has received bids for 2,59,22,800 units against offer size of 6,77,46,400 (excluding strategic and anchor investors' book), the data available on the exchanges showed.
The reserved portion of institutional investors was subscribed 37 percent and that of non-institutional investors 40 percent.
The IPO consists of a fresh issue of Rs 1,000 crore and an offer for sale of Rs 3,500 crore; of which the company already raised Rs 2,643.74 crore from strategic and anchor investors. Hence the net issue now stood at Rs 1,856.26 crore.
The issue will close on July 29 and the price band has been fixed at Rs 274-275 per share.
The minimum bid lot size is 200 units and in multiples of 200 units thereafter.
Mindspace REIT, backed by K Raheja Group and Blackstone, is the owner of a high-quality office portfolio in India that serves as an essential corporate infrastructure to multinational tenants and has significant embedded growth prospects. Mindspace portfolio consists of five integrated business parks with superior infrastructure and amenities and five quality independent offices aggregating to 29.5 million square feet (msf) of total leasable area.
It is one of the largest Grade-A office portfolios in India located in four key office markets of India in Mumbai Region, Hyderabad, Pune and Chennai. These markets have exhibited strong market dynamics with world-leading absorption and constrained forecast supply resulting in high rent growth and low vacancy on average.
"Majority of the Mindspace REIT portfolio is in Navi Mumbai and Hyderabad and the majority of the tenants are IT and financial services companies. These markets have witnessed stable growth over the last few years and current rental levels in this market are well within $1 per square feet per month. Investing in this REIT would imply relying on the ability of these markets to generate steady rental income over the next few years," Sharad Mittal, CEO at Motilal Oswal Real Estate Fund told Moneycontrol.
He said with around 80 percent of the portfolio comprising completed assets and a projected yield of 7-7.5 percent on the issue price, one can expect an overall return in the range of 11-12 percent by investing in this REIT.
Mindspace Business Parks REIT will be the second REIT to be listed in India, after Embassy REIT of Rs 4,750 crore listed in March 2019.
"REITs provide the opportunity to invest in a pool of completed rental yielding properties and earn a return which is a combination of rentals + an increase in the value of the property itself. REITs combine elements of debt and equity and provide a return of around 12-13 percent of which around 8 percent is fixed (based on the rental income) and balance accrues through growth in the asset value," Mittal said.
The listing of the REIT makes it a highly liquid product and makes it accessible to investors who can invest in rent yielding real estate with a small ticket size starting Rs 50,000, he added.
"With the dividend exemption provided to distributions made by the REIT, this investment also becomes tax efficient in the hands of the investor. Globally, REITs have provided returns commensurate with those provided by equities over a 10-15 years period with a large part of the return being less volatile compared to equities," he said.
From an investor standpoint, the REIT product is a must-have in any portfolio, he believes.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.