Prime Office Assets Of USD 61 Bn Across 7 Top Cities Eligible To Be Included In REITs, Get Listed: JLL

India’s seven major cities have premium office properties worth USD 61 billion that are fit to be included in Real Estate Investment Trust (REIT) and get listed on stock exchanges, according to JLL India.

Real estate consultant JLL India highlighted that the seven major cities have 393.7 million square feet of rent-yielding Grade A office space that is REIT-worthy for future listing.

In India, there are four REITs, which are listed on stock exchanges, of which three are backed by office assets and one backed by retail (shopping mall) properties.

Three listed office-backed REITs are Embassy Office Parks REIT, Mindspace Business Parks REIT and Brookfield India Real Estate Trust. Nexus Select Trust, which got recently listed on stock exchanges, is India’s first retail-asset-backed REIT.

REIT, a popular instrument globally, was introduced in India a few years ago to attract investment in the real estate sector by monetising rent-yielding assets. It helps unlock the massive value of real estate assets and enables the participation of retail investors.

According to JLL, “India’s rent-yielding Grade A office market comprises 393.7 million square feet of REIT-worthy assets worth over USD 61 billion for future listing.” Bengaluru leads the REIT-worthy office stock with a 32 per cent share, followed by Delhi NCR at 15 per cent and Mumbai at 14 per cent. It mentioned that already 74.4 million square feet of office space was under REIT as of March 31, 2023.

JLL expects that the country could witness listing of REITs backed by other alternative asset class like warehousing and hotels.

”Indian real estate market is expected to witness further REIT listings of alternative asset classes, while the office sector will continue to see steady growth in REIT listings,” said Lata Pillai, Senior Managing Director & Head of Capital Markets, India, JLL.

The consultant noted that the listing of REITs in India has introduced a real estate investment option akin to mutual funds. Talking about the benefits, JLL India said that REITs provide diversification across asset classes and geographies, offering an opportunity to invest in real estate properties in smaller denominations through organized and formal platforms.

The consultant said that REITs offer lower transaction costs, tax savings, easy liquidity, and access to professional expertise.

Commenting on the report, Atul Banshal, Director-Finance, Omaxe Ltd, said, ”As the demand for office spaces continues to grow, there is an opportunity for these spaces to be included in REITs. This inclusion allows investors to participate in the office space market, and as a result, we can expect to see a surge in the supply of Grade A office spaces in the near future,” he added.

Bengaluru-based managed co-working space provider Urban Vault co-founder Amal Mishra said there has been a remarkable shift in the preferences of office occupiers in India in recent years.

“Grade A offices and flexible office setups are progressively replacing conventional and traditional office space arrangements. Moreover, such office spaces have the potential to be included in REITs portfolios, offering investors the opportunity to participate in the commercial real estate market,” Mishra said.