India’s Real Estate Investment Trust (REIT) market place will enter a period of prolonged development, with more REITs forecast to be listed in 2021 and beyond. According to JLL, as REITs develop by way of organic and inorganic implies and more REITs get listed, the quantity of purchasers and sellers will broaden substantially, additional rising market place liquidity and yield compression. With some of the significant players in the nation currently working on developing good quality portfolio across diverse asset classes – the nation is also probably to see more of retail, warehousing & hotel assets as aspect of REIT offerings in the close to future.
Continued government assistance for the REIT sector is also anticipated. Real estate is the second biggest employer and its contribution to Indian GDP is anticipated to attain 13% by 2025. This tends to make it a higher priority sector and the existing government continues to bring in significant reforms to make it more accessible and appealing for foreign investors.
SEBI – the governing body for REIT – has currently come out with a series of amendments favouring the investor neighborhood final year. Further to strengthen investor interest in REITs, the Union Budget 2021-2022 announced additional measures to ease economic access by enabling FPIs to invest in debt instruments of REITs, and separately giving tax reliefs by exempting TDS on dividends paid to REITs. Attractive tax structures, relaxing of norms for sponsors and so on. aim to make Indian REITs more appealing to international equity investors and domestic institutional and retail investors.
“The continued success of listed REITs in India can be attributed to sponsor quality, track record and ability to stay transparent and deliver predicable returns. JLL believes that India’s current office markets across seven major cities have potential space of 284 million sq. ft that could be securitised with an estimated value of $36 billion (Rs 262,800 crore). 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 $3.1 billion in 2020, underscoring its importance to future REIT listings in India,” says Dr Samantak Das, Chief Economist and Head Research & REIS, JLL.
Bengaluru is identified as India’s biggest supply for possible assets obtainable for securitisation, accounting for 31% or 88 million sq ft of REIT worthy asset, valued at $11.16 billion (Rs 81,468 crore). The city, with significant IT spaces housing international occupiers, will be the most favoured market place for the newly-listed REITs, offered that most assets are singly owned by developers or significant funds, permitting for the aggregation of assets into managed structures.
The listed markets in India performed effectively, giving self-assurance in the future of the India REIT sector.
The forecast for more listings follows the productive launch of India’s third sponsored REIT in early 2021. Since the initial India REIT was listed in 2019, a framework for enhanced liquidity, transparency, and corporate governance was made for REITs to thrive.
“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. Furthermore, we are encouraged by the larger domestic institutional investor participation in the more recent listings and the emergence of a public private arbitrage play welcomed by all investors in the market,” says Priyank Shah, Director, Capital Markets, Asia Pacific, JLL.
There are possibilities for institutional investors to participate in this structural theme, potentially by assembling complementary portfolios for securitisation into REITs, or co-investing with current platforms pre-IPO. Despite difficult socio-financial atmosphere, the existing REIT framework in India as compared to other mature markets has currently set the stage for continued accomplishment for the sector. These consist of the good quality of sponsors, their market place encounter and relationships inside the India genuine estate eco-program and the good quality of the initial REIT portfolios, like the higher-good quality tenant profiles, lease expiry profiles and diversity of assets.
Several components have offered investors and regulators more self-assurance in the REIT space’s future in 2021 and into the future. The initial two listed REITs’ wholesome efficiency lowered the marginal price of capital for Indian genuine estate. Additionally, REIT sponsors effectively recycled capital post-listing by way of asset divestments and rationalisation of their equity stakes, which raised institutional groups’ self-assurance to obtain bigger 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,” says Regina Lim, Head of Capital Markets Research, Asia Pacific, JLL.
The market’s fundamentals make it a higher-priority sector and have prompted the government to bring in significant reforms to make it more accessible and appealing for foreign investors.