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Office space of around 100 mn sq ft expected to be listed in REITs

Total REIT-worthy assets, including Embassy Office Park REIT, would translate to a potential investment of $38.6 billion, according to JLL Research.

The success of the first REIT in India may lead to around 100 mn sq ft office space getting listed in the short to medium term out of the total REIT-worthy assets of 302 mn sq ft, according to JLL Research.

Total REIT-worthy assets, including Embassy Office Park REIT, would translate to a potential investment of $38.6 billion, the report said.

India's top six cities - Delhi-NCR, Mumbai, Pune, Bengaluru, Chennai and Hyderabad - account for a majority of the share of Grade-A office space assets.

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Embassy Office Parks REIT was launched in April 2019 and is currently trading at a premium of 37 per cent to its allotted price as on November 25, 2019, the Research said.

Bengaluru-based Prestige Group has 11 million sq ft of rent yielding assets and nearly 15 million sq ft of under-construction office assets. As per market reports, there are strong indications of Blackstone Group and K Raheja Corp listing their jointly-owned 20 million sq ft commercial portfolio through REIT. Together, these players would account for almost 50 percent of the potentially upcoming REIT universe.

As per publically available news reports, other players who are also considering REIT listings include Bengaluru-based RMZ Corp, Mumbai-based Godrej Properties and Pune-based Panchshil Realty, the research said.

A strong demand-supply condition in the office market would also drive the return of REITs. However, any impediment to the supply pipeline will impact the REIT listings too.

Some challenges to more REITs getting lists are limited knowledge and awareness of the new product. Investors have not even seen a full year of the run for the first REIT. Compared to this, they already have multiple alternate investment options across other asset class to look at within the ambit of the capital markets.

Since REITs are listed on the NSE and BSE, trends in the equity markets will influence the return expectations of retail investors looking at REITs market. As a result, like any other market-linked investment option, retail investors have to be told about the risks, it said.

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First Published on Nov 27, 2019 02:23 pm
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