Mindspace Business Parks REIT IPO
“One can expect an overall return in the range of 11-12% by investing in this REIT” Sharad Mittal, CEO, Motilal Oswal Real Estate Fund.
“REITs provide the opportunity to invest in a pool of completed rental yielding properties and earn a return which is a combination of rentals + an increase in the value of the property itself. REITs combine elements of debt and equity and provide a return of ~12-13% of which ~8% is fixed (based on the rental income) and balance accrues through growth in the asset value.
The listing of the REIT makes it a highly liquid product and makes it accessible to investors who can invest in rent yielding real estate with a small ticket size starting Rs. 50,000. With the dividend exemption provided to distributions made by the REIT, this investment also becomes tax efficient in the hands of the investor.
Globally, REITs have provided returns commensurate with those provided by equities over a 10-15 years period with a large part of the return being less volatile compared to equities. From an investor standpoint, the REIT product is a must have in any portfolio.
The Mindspace Business Parks REIT will be the second REIT to be listed in India. Majority of the Mindspace REIT portfolio is in Navi Mumbai and Hyderabad and majority of the tenants are IT and financial services companies.
These markets have witnessed a stable growth over the last few years and current rental levels in this market are well within USD 1 per sq ft per month. Investing in this REIT would imply relying on the ability of these markets to generate steady rental income over the next few years.
With ~80% of the portfolio comprising completed assets and a projected yield of 7-7.5% on the issue price, one can expect an overall return in the range of 11-12% by investing in this REIT.