The untapped Real Estate Investment Trust (REIT) potential stands at 57 percent in India, with 380 million square feet (msf) of existing Grade A office space qualifying to be listed as REITs, according to a report by Colliers, a global real-estate and investment advice firm.
Additionally, about two-thirds of the ‘REIT-able’ Grade A office stock falls in Secondary Business Districts (SBDs) of the top six cities in India.
The top six cities are Bengaluru, Chennai, Delhi NCR, Hyderabad, Mumbai, and Pune.
Bengaluru leads these cities, with the largest share of 25 percent, followed by Hyderabad at 19 percent. Furthermore, 41 msf of under-construction office stock is expected to be available in the office market by the end of 2023.
“REITs in India are still at their early stages, compared to other regional markets. Strikingly, the market capitalisation of Indian REITs is less than 10 percent, compared to the US, Singapore, and other countries in the APAC. Considering the size of the Indian office market, there exists a huge potential for expansion," Piyush Gupta, Managing Director, Capital Markets and Investment Services, Colliers India added.
REIT expansion
In years to come, we are likely to see REITs expand to other asset classes such as industrial class, data centres, hospitality, healthcare and educational sectors, he said.
The report pointed out that among the SBDs, Hyderabad holds the highest quantum of REIT-worthy stock, with 28 percent share, followed by Bengaluru at 24 percent.
Further, over 60 percent of the Grade A stock within SBDs is REIT-worthy. At the same time, about half of the total Grade A office stock in Peripheral Business Districts (PBDs) across the top six cities is REIT-worthy.
"Understandably, the Central Business Districts (CBDs) have a relatively lower share of REIT-able stock, at 10 percent, due to limited new supply and presence of relatively older buildings," the report added.
At present, the three listed office REITs (mention their names) cumulatively hold approximately 74.4 msf of office REIT stock, representing around 11 percent of the total existing Grade A office stock, Colliers said.
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