REITs in In­dia: An op­por­tu­nity awaits

Hindustan Times (Chandigarh) - Estates - - FRONT PAGE - Ramesh Nair feed­back@hin­dus­tan­times.com Ramesh Nair is CEO & Coun­try Head, JLL In­dia.

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

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