India is well positioned to be the most dynamic REIT (real estate investment trust) market globally as developers look to monetise their rent-yielding commercial properties through this structure, according to Vestian.
US-based real estate consultant Vestian, on Saturday, released a report stating that the Indian REIT market has a great potential for growth because of availability of prime commercial assets (office, retail, warehousing and data centres) that can be monetised through this structure.
(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. At present, there are five listed REITs in India -- Sattva Group and Blackstone-backed Knowledge Realty Trust (KRT), K Raheja Group-backed Mindspace Business Parks REIT, Brookfield India Real Estate Trust, Embassy Office Parks REIT and Nexus Select Trust.
"India's REIT market is steadily progressing from infancy towards adolescence. Market capitalisation is projected to increase from USD 18 billion in 2025 to USD 25 billion by 2030," Vestian said in a statement. With the doubling of REIT-able office assets, alongside the expansion of retail and alternative asset classes, the consultant said India is well-positioned to emerge as one of the most dynamic REIT markets globally.
"The foundations are firmly in place. The next phase of growth will be driven by diversification, scale and policy coherence, key catalysts that will transform India's REIT platform into a broad, multi-sector investment universe," the report said. Out of the five listed REITs, only Nexus Select Trust is backed by retail properties. The remaining four are office REITs.
Shrinivas Rao, CEO of Vestian said, "India's REIT market holds huge upside potential, given its low penetration and the need to move beyond offices and selective retail. As the market evolves, asset classes such as data centres, logistics, industrial parks and warehousing offer scalable, yield-bearing opportunities aligned with mature global REIT markets."
The Vestian report noted that office assets continue to anchor India's REIT market. The listed portfolios span over 135 million sq ft. These office assets benefit from predictable leasing demand from global capability centres (GCCs), technology firms and BFSI occupiers, supporting stable yields of 5-7 per cent, the consultant said.
India has over 1 billion sq ft of office stock, of which nearly 500 million sq ft is considered REIT-worthy. On the housing properties, Vestian said the residential assets class has potential but it is not yet prepared. "Residential real estate remains on the threshold of REIT inclusion but faces structural challenges. Low rental yields of 2-3 per cent, fragmented ownership, high tenant churn and the absence of large institutional rental portfolios continue to limit viability," the consultant said.
Also read: REITs surge to $8.87bn in India’s real estate sector
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