REITs in India: An opportunity awaits
NEW DELHI: REITs (Real estate investment trusts) will be a big boon for the Indian real estate industry.
In simple terms, a REIT is an investment tool that owns and operates real estate assets and even allows individual investors to invest in and earn income through partial/equity level ownership of commercial real estate without actually having to buy those assets.
REITs are modelled after mutual funds, and provide their investors with all types of income streams as well as the benefits of long-term capital appreciation.
A REIT also trades on major stock exchanges and provides investors with a highly liquid stake in real assets typically offering high yields.
Over the last decade, globally, REITs have developed into a mature market force, providing easy access to high-quality assets along with stable return on investments. Taking a closer look at REITs globally: • USA: The US Congress created the Real Estate Investment Trust (US-REIT) in 1960 to make large-scale, incomeproducing real estate investments accessible to smaller investors. Since then, US-REIT has dominated the market, and has a market capitalization which grew from $1.4 billion in 1971 to $1 trillion by 2016. • Singapore: Since the launch of the first Singapore REIT in 2002, the REIT sector has become the biggest success stories of the Singapore Stock Exchange.
Australia: The first REIT here was the General Property Trust – a listed property trust started in 1971. A-REITs are the largest REIT market in Asia with a total market cap of €72 billion, accounting for 9.36% of the global REIT market capitalization. Given the currently sluggish demand for residential real estate in India, the office sector provides some relief for real estate developers, given the declining vacancy levels and improving rents.
Close to 283 million sq ft of office space in India is REITable. Currently, there are 901 REIT-worthy properties in India:
There is no doubt that REITs will provide access to highly lucrative assets, such as largescale commercial properties and high-quality retail assets, that may be otherwise out of reach for individual investors. Once the first REIT listings go live in India, we will definitely see significantly increased institutional and retail investor participation in this market.
OVER THE LAST DECADE, GLOBALLY, REITS HAVE DEVELOPED INTO A MATURE MARKET FORCE, PROVIDING EASY ACCESS TO HIGHQUALITY ASSETS ALONG WITH STABLE RETURN ON INVESTMENTS