Exclusive: Blackstone, Sattva Group and Panchshil Realty to float India's fourth commercial REIT in FY25

With a projected portfolio of over 40 million square feet (msf), the upcoming REIT would rank as the second-largest commercial REIT in South Asia.

The Blackstone Group, the world’s largest alternative asset manager, in collaboration with Bengaluru's Sattva Group and Pune's Panchshil Realty, is in advanced discussions to float a commercial REIT in FY25,  according to people familiar with the matter. The proposal is expected to be submitted to the market regulator by mid-FY25.

The upcoming REIT, with a projected portfolio of over 40 million square feet, would rank as the second-largest commercial trust in South Asia, behind Embassy REIT, which boasts a portfolio of 45.4 million square feet.

Embassy REIT is India’s first publicly listed REIT. It owns and operates office parks and four office buildings in Bengaluru, Mumbai, Pune and the National Capital Region. Blackstone exited Embassy REIT in December.

The proposed REIT encompasses an estimated 1-1.5 million square feet of office space slated for development in early FY25, the people said. This initiative reflects the broader collaboration between Blackstone and the Sattva Group, extending to Hyderabad and Bengaluru.

Between Bengaluru and Hyderabad, the two entities jointly manage approximately 33 million square feet of commercial developments, with both holding equal equity stakes. Additionally, the Sattva Group's partnership with Blackstone extends to the acquisition of Bengaluru's Global Tech Village in September 2020.

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Blackstone owns and manages a portfolio spanning 45 million square feet across nine office parks and four office buildings in Bengaluru, Mumbai, Pune, and the National Capital Region.

The launch of India's fourth commercial REIT is poised to reshape the country's real estate investment landscape, offering new avenues for investors while driving growth in the commercial property sector.

A list of questions has been sent to the companies for a response.

REITs to make a comeback

Experts said that as REITs expand into new asset classes like industry, data centres, hotels, healthcare and education, they will experience rapid development. The office real estate market is set to make a comeback in 2024 and is positive for REITs, they added.

Office space of a gross 61.6 million square feet was leased in India in 2023, a growth of 7 percent, making it the second highest after 2019, according to data from CBRE India.

REITS, which are at an early stage in India compared to other investment avenues, are set to benefit from a likely turn in the interest rate cycle.

"Today, interest rates are at a peak but likely to go down. It will have a positive impact on REIT prices, which will eventually go up. REITs are partially a public market and partially stable income investments and thus the return expectations have to be calibrated (as compared to returns from the stock market)," said Piyush Gupta, managing director of capital market and investment services at Colliers India.