India’s prime office stock worth ₹4.5 trillion could qualify for inclusion in real estate investment trusts (REITs), according to a report by Vestian. The report indicates that 60% of the country’s total Grade-A office space falls under this category.
As published by Business Standard, among India’s top seven cities, Bengaluru dominates with 33% of the REIT-eligible stock, followed by Hyderabad with 21% and the National Capital Region (NCR) with 15%. Mumbai and Pune together account for 21%, while Chennai contributes 10%. Kolkata lags behind, with just 1% of the total stock.
The report highlights that REIT-worthy assets are concentrated in commercial hubs featuring branded Grade-A office buildings. These properties are predominantly located in prime business districts, further enhancing their appeal to REITs.
Despite the promising stock, India’s REIT market remains in its infancy compared to global counterparts. Currently, the country has four listed REITs that collectively manage approximately 125 million square feet (msf) of office and retail space.
The market capitalization of Indian REITs accounts for just 13.7% of the total listed real estate sector, a stark contrast to mature markets like the United States (98.9%), Australia (94.8%), and the United Kingdom (92.5%).
Performance data for the listed REITs shows promising returns since their inception. Embassy REIT delivered 24%, Mindspace REIT 18%, Brookfield India REIT 6%, and Nexus Select Trust REIT led with a 39% return.
Experts at Vestian suggest that India’s abundant Grade-A office inventory could significantly boost the REIT market, potentially transforming the commercial real estate investment landscape.