India REITs market poised to evolve in 2021, led by Bengaluru at 88 million sq. ft: JLL

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India’s Real Estate Investment Trust (REIT) market will enter a period of prolonged growth, with more REITs forecast to be listed in 2021 and beyond.

“The continued success of listed REITs in India can be attributed to sponsor quality, track record and ability to stay transparent and deliver predicable returns,” said Samantak Das, Chief Economist and Head Research & REIS, JLL.

JLL believes that India’s current office markets across seven major cities have potential space of 284 million sq. ft that could be securitized with an estimated value of $36 billion (Rs 262,800 crores).

Bengaluru is identified as India’s largest source for potential assets available for securitization, accounting for 31% or 88 million sq ft of REIT worthy asset, valued at $11.16 billion (Rs 81,468 crores).

The city, with large IT spaces housing global occupiers, will be the most favored market for newly listed REITs.

Delhi NCR comes second with 48.3 million sq. ft valued at $6.48 billion (Rs 47,304 crore), while Mumbai comes next with 36.9 million sq. ft valued at $6.84 billion (Rs 49,932 crore).

The forecast for more listings follows the successful launch of India’s third sponsored REIT in early 2021. Since the first India REIT was listed in 2019, a framework for improved liquidity, transparency, and corporate governance was created for REITs to thrive.

Several factors have given investors and regulators more confidence in the REIT space’s future in 2021 and into the future. The first two listed REITs’ healthy performance lowered the marginal cost of capital for Indian real estate. Additionally, REIT sponsors successfully recycled capital post-listing through asset divestments and rationalization of their equity stakes, which raised institutional groups’ confidence to acquire larger portfolios.

“As listed REITs grow organically and inorganically and more REITs get listed, these structural themes will become even more pronounced. Some major players are already building quality portfolios across diverse asset classes and we could potentially see more retail, warehousing and hotel assets in future REIT offerings as well,” says Regina Lim, Head of Capital Markets Research, Asia Pacific, JLL.