March 20, 2024: India’s REIT market has shown noteworthy growth since its inception in 2019 with over Rs 1,30,000 crore in gross assets under management (AUM), a market capitalisation of over Rs 85,000 crore and a portfolio covering 115 million square foot of Grade-A office and retail spaces nationwide, data show.
According to the Indian REITs Association (IRA), in just five years, REITs have distributed more than Rs 15,500 crore, surpassing the entire NIFTY Realty Index combined, and have raised over Rs 25,500 crore of equity capital through primary issuances, including initial listings and follow-on offerings. As of February 29, 2024, the number of unitholders in the four REITs has grown to over 200,000, highlighting the enthusiasm of retail investors seeking to own commercial real estate in a liquid, regulated, and professionally managed structure that Indian REITs provide.
In its first CEO roundtable held in Mumbai on March 20, the IRA also revealed that India currently has over 400 MSF of REIT-able office space and over 70 MSF of REIT-able retail space, out of which only 100 MSF and 10 MSF, respectively, are part of Indian REITs. This showcases a tremendous growth opportunity in the REIT asset class in India.
Launched in September 2023, the IRA was formed to drive key agenda items such as strengthening the operating and regulatory environment for the Indian REIT market, deepening the capital markets, and increasing investor education programs among others. The event was attended by Alok Aggarwal, MD and CEO of Brookfield India Real Estate Trust, Aravind Maiya, CEO of Embassy REIT, Ramesh Nair, CEO of Mindspace Business Parks REIT and Dalip Sehgal, CEO of Nexus Select Trust. The meet was a platform to discuss topics critical to the advancement of the growth and development of the Real Estate Investment Trust (REIT) sector in India.
Global REIT market landscape
REITs are a global asset class first introduced in the US in 1960 to allow retail investors to invest in commercial real estate in a liquid vehicle listed on the stock exchanges. Globally, there are over 1,000 listed REITs with a collective equity market capitalisation of approximately $2 trillion as of December 2023.
Evolution of REITs in India
The journey of REITs in India commenced with the introduction of regulatory guidelines in 2014 and culminated in the public launch of REITs in 2019, with Embassy REIT’s listing. Following this, two more REITs were listed on the Indian exchanges: Mindspace Business Parks REIT in 2020 and Brookfield India Real Estate Trust in 2021. In May 2023, India’s first retail REIT, Nexus Select Trust, was listed.
The Indian REIT regulations mirror international REIT standards and have played a key role in facilitating the institutionalisation of the Indian commercial real estate market. Indian REITs are required to invest 80% of their portfolio in income-producing properties, pay out at least 90% of net distributable cash flow to investors semi-annually, and are limited to a conservative debt-to-capitalization ratio of 49%.
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