The Indian commercial real estate market is expected to provide 294 million sq ft of REITable space which would be valued at $35 billion, says a report.
IT/IT-SEZ office space to dominate REITable assets across the country. With large and quality IT spaces occupied by prominent global players, Bengaluru will be the most favoured city for REITable assets. Presence of single-ownership ready properties make it easier to aggregate the assets and manage them for REITs.
At 33 percent share of REITable space, Bengaluru will provide the highest REITable assets totaling 97.8 mn sq ft, worth $10.7 billion followed by Mumbai at 17 percent and worth 8.6 billion dollars. Delhi-NCR and Chennai follow Mumbai both in space and value terms, says the report titled 'India REITs - Heralding a new era in real estate investments'.
Rising transparency levels, progressive regulations and a robust commercial real estate market in the country have made the segment a favorite among institutional investors, it says. Investors have allocated nearly 17 billion dollars in the form of direct investments as well as through entity level investments from 2006 to 2019 in the office space.
India has already seen its first REIT listing from Embassy Group-Blackstone JV in March this year.
"The listing of India's first REIT heralds the institutionalisation of real estate assets and indicates enhanced maturity and professionalism in real estate market. Growing knowledge of REITs will ensure acceptability and gradual increase of interest from retail investors. We expect to see other asset classes like retail, warehousing and hospitality also offering REITable assets in the times to come," said Ramesh Nair, CEO and country head, JLL India.
Samantak Das, chief economist and head of Research & REIS, JLL India said: "Indian office space holds the potential to offer additional 101 mn sq ft of office space for REIT from the new office completion expected during 2019-21. This could help upcoming REITs to gain from upside in rentals as well as capital appreciation. While the strong institutional flow of funds into real estate will continue to provide initial momentum towards REITs' growth in the country, active participation of insurance and pension funds in future will help in long term growth of the market."
Other asset classes like retail, warehousing and hospitality to offer scope for REIT investments in the future, the report said.