“This estimate was based on buildings that meet two important criteria – single ownership and large floor space with high occupancy rate.
The office space led the pack among asset classes in India, with direct office transactions reaching USD 3.1 billion in 2020, underscoring its importance to future REIT listings in India,” said Dr, Samantak Das, chief economist and head research & REIS, JLL.
Bengaluru accounts for 31% or 88 million sq ft of REIT worthy asset, valued at Rs 81,468 crore. “The city, with large IT spaces housing global occupiers, will be the most favoured market for newly listed REITs, given that most assets are singly owned by developers or large funds, allowing for the aggregation of assets into managed structures,” according to JLL.
“India’s REIT evolution has been both rapid and revolutionary for the real estate sector. The fact that the closing of transactions was made possible even amidst a pandemic has demonstrated the maturity of the market and transformed India’s real estate corporate finance landscape and market liquidity,” said Priyank Shah, director, Capital Markets, Asia Pacific, JLL.
Several factors have given investors and regulators more confidence in the REIT space’s future in 2021 and into the future. The first two listed REITs’ healthy performance lowered the marginal cost of capital for Indian real estate.
Additionally, REIT sponsors successfully recycled capital post-listing through asset divestments and rationalisation of their equity stakes, which raised institutional groups’ confidence to acquire larger portfolios.
“As listed REITs grow organically and inorganically and more REITs get listed, these structural themes will become even more pronounced. Some major players are already building quality portfolios across diverse asset classes and we could potentially see more retail, warehousing and hotel assets in future REIT offerings as well,” said Regina Lim, head of Capital Markets Research, Asia Pacific. JLL.
Attractive tax structures and relaxing regulatory norms for sponsors aim to make Indian REITs more attractive to global equity investors and domestic institutional and retail investors.