Indian Real Estate Investment Trusts (REITs) are faring far better than their western and Asian counterparts, says a study that found the average yield of Indian REITs to have been between 6-7.5 per cent for unitholders.
The report by CREDAI, the apex body of Indian real estate developers, and Anarock, a property consultancy, is titled, ‘Indian REITs - A Gateway to Institutional Real Estate’.
"Average distribution yields of Indian REITs range between 6 per cent and 7.5 per cent, competitive with fixed-income instruments but with the added potential for capital appreciation," the joint report said.
REITs are investment vehicles that own or operate income-generating real estate, enabling investors to earn a share of the income produced without directly purchasing the properties.
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At present, there are five listed REITs in India – Brookfield India Real Estate Trust, Embassy Office Parks REIT, Mindspace Business Parks REIT, Nexus Select Trust, and Knowledge Realty Trust.
Nexus Select Trust are backed by rent-yielding retail real estate (shopping malls) while the other four are office REITs.
The report found that when compared with other REIT markets globally, India still lags mature markets like the US, Singapore, and Japan in the diversification of REIT asset classes, however, the risk-adjusted yields in India remain attractive.
"Indian REITs are late to the party, but now lead the dance. Despite its late entry compared to global peers, India has strong fundamentals,” said Shobhit Agarwal, CEO of Anarock Capital, and added, “The distribution yields are well above many mature markets such as the US and Singapore.”
The average yield in the US is 2.5-3.5 per cent, Singapore 5-6 per cent and Japan 4.5-5.5 per cent.
Shekhar Patel, President of CREDAI, said, "Over 60 per cent of India's REIT market value today rests with a very small set of players, with a strong base in Grade A offices linked to IT and BFSI. The future, however, holds far wider promise. As India's cities grow, infrastructure strengthens, and the economy diversifies, REITs will expand into retail, logistics, housing, and new-age assets.”
This transformation will unlock unprecedented opportunities for investors, Patel added.
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