India currently has USD 35 billion worth of office spaces that are eligible to be listed under the Real Estate Investment Trust (REIT), according to property consultant JLL India.
REIT is an investment tool that owns and operates rent-yielding real estate assets. It allows individual investors to make an investment in this platform and earn income.
The successful listing of India's first REIT floated by Embassy Office Parks heralds the institutionalisation of real estate assets and indicates enhanced maturity and professionalism in the real estate market, JLL India Chief Executive Officer and Country Head Ramesh Nair said.
"Growing knowledge of REITs will ensure acceptability and gradual increase of interest from retail investors. We expect to see other asset classes like retail, warehousing and hospitality also offering REITable assets in the times to come," he said.
According to JLL's latest report titled India REITs - Heralding a new era in real estate investments released today, Indian commercial real estate market is estimated to provide 294 million sq ft of REITable space from the existing office stock. "These REITable assets would be valued at USD 35 billion".
Investors have allocated nearly USD 17 billion in the form of direct investments as well as through entity-level investments from 2006 to 2019 in the office space.
The report found out that with 33 per cent share of REITable space, Bengaluru will provide the highest REITable assets totalling 97.8 million sq ft, worth USD 10.7 billion.
Mumbai follows Bengaluru with 17 per cent share of total REITable space at 49.7 million sq ft worth USD 8.6 billion.
The emergence of new office space occupiers continued demand from IT/ITeS, global in-house centres along with the BFSI space are expected to keep office space demand robust over the next three years.
"Indian office space holds the potential to offer additional 101 mn sq ft of office space for REIT from the new office completion expected during 2019-21. This could help upcoming REITs gain from upside in rentals as well as capital appreciation," said Samantak Das, chief economist and head of research, JLL India.
While the strong institutional flow of funds into real estate will continue to provide initial momentum towards REITs' growth in the country, active participation of insurance and pension funds in future will help in long term growth of the market, Das added.