BENGALURU: India is set to see its first Real Estate Investment Trust (Reit) listing in June. This could fuel demand for office space in the country. The commercial real estate sector would not only grow manifold in value thanks to Reits, it would also streamline transactions in the sector which is largely unorganised at present, say realtors.
A Reit is a company which owns or finances income-producing real estate. It allows the public to invest in properties through purchase of stock.According to industry estimates, currently 229 million sq ft of office space is compliant with Reits. Even if half of this were to get listed in the next few years, the total value would be close to `1.25 lakh crore.
Replying to Express’ queries, Surendra Hiranandani, chairman and managing director or House of Hiranandani, said in the current year, Reits could trigger demand for office space from logistics, manufacturing and consumer goods, apart from information technology and information technology-enabled services, and the banking and financial services sectors.
Fresh investments are expected in commercial real estate as the yields have always been higher at 8-10 per cent against 3-4 per cent in the residential sector.
He added that out of the total assets available under Reits, rent-generating office inventory itself is spread over 537 million sq ft valued at $70 billion.“A significant part of this is located in Mumbai, National Capital Region, Bengaluru, Chennai, Hyderabad, Kolkata and Pune. Other properties like warehousing, retail malls, shopping centres and school buildings can become potential assets. The all-India warehousing Reit-able assets stand at 1.12 billion sq ft,” he noted.
RBI allowing banks to invest in Reits is another step in encouraging fund flows towards the sector, especially in the light of developers having limited alternate options of funding, said Ram Chandnani, co-chair-elect, CoreNet Global, India Chapter.
“The introduction of Reits would significantly enhance the transparency and governance in the real estate market, which is imperative for a better public market scrutiny and to attract more institutional fund flows into the sector,” he added.