India has rent yielding office inventory to the tune of 537 sq mtr
The much awaited Real Estate Investment Trust (REIT) listing is inching closer to reality and India has rent yielding office inventory to the tune of 537 million sq. ft. worth over $70 billion.
According to a jointly released report by KPMG, NAREDCO, Hariani & Co and Knight Frank titled ‘REIT-able Space in India: A Closer Reality’ said the REIT worth assets may cover completed and rent-generating real estate assets.
It is estimated that approximately $121 billion or 1.73 billion sq. ft. of occupied commercial real estate across the office, retail and warehouse segments could potentially benefit from the REIT opportunity.
Warehousing, retail malls, shopping centres and school buildings to name a few comprise potential REIT assets spread.
According to the report released today, REIT is expected to have a large opportunity in the Indian real estate market, which is supported by strong economic growth, a large portfolio of completed commercial real estate and a conducive investment climate.
In the case of office and retail, approximately 537 mn sq. ft. and 75 mn sq. ft. respectively is REIT-able area located in the top seven cities, namely Mumbai, NCR, Bengaluru, Chennai, Hyderabad, Kolkata and Pune.
With respect to warehousing space, the all-India estimate is approximately 1,127 mn. sq. ft.
Returns on equity of traded REITs fared better than returns on leading stock market indexes globally over the past 10 years.
The five-year returns for REITs were between 7 and 16 per cent globally. With the Japanese and Malaysian markets providing returns in the range of 8 to 10 per cent, expectations from Asian economies is on the rise.
In Asia, REITs debuted in Japan, followed by Singapore, Indonesia and South Korea. Japan and Singapore are the market leaders in Asia for REIT. More than 20 countries now have REIT or a similar structure. Since its birth in the US close to five decades ago, the REIT market has mushroomed across the globe.
Rajeev Bairathi, ED, and Head – Capital Markets, Knight Frank India said, “While on one hand, REIT would help developers unlock value from their leased out assets and generate much needed capital, it would also provide a much needed entry and exit vehicle for global institutional investors looking to invest in non-residential real estate assets in India.”