India's Real Estate Investment Trust (REIT) market witnessed a 31% year-on-year growth in 2023, marking the highest growth rate across the Asia Pacific region, according to a report by real estate services firm Cushman & Wakefield. This development presents a promising opportunity for investors.
The launch of Blackstone’s Nexus Select Trust, India’s first publicly listed retail REIT, played a role in this significant growth, despite a 7% decline in the overall Asian REIT market, which now stands at $252 billion.
Somy Thomas, Managing Director of Valuation & Advisory and Capital Markets at Cushman & Wakefield, noted that the positive outlook for office markets, driven by the return of employees to workplaces, large-scale deals, and high occupancy rates, has supported the expansion of REITs in India. As more developers bring their portfolios to market and institutional demand for high-quality office and retail assets persists, the REIT market in India is expected to continue its growth trajectory.
Although the Indian REIT market is still in its early stages, with only four REITs listed so far, the strong investor interest in these initial public offerings (IPOs) over the past five years highlights the product's appeal.
Across Asia, there are 225 active REITs, with Japan, Singapore, and Hong Kong dominating the market, accounting for more than 80% of the total Asia REIT market value. However, emerging markets like China and India, which are now the fourth and fifth largest REIT markets in Asia, respectively, are introducing new opportunities for growth, according to the report.
India's robust performance underscores its growing significance in the REIT sector, offering investors diverse and attractive growth prospects.
Nexus Select Trust, with its portfolio of 17 urban shopping centers across 14 tier-1 and tier-2 cities, along with two hotels and three office assets, has seen its stock price rise by 30% within a year of its IPO. The trust plans to expand its portfolio by an additional 20 million square feet over the next five years through strategic acquisitions.
India's leading office REITs, Embassy and Mindspace, have delivered 9-10% compound annual growth rate (CAGR) returns over the past two years, bolstering investor confidence in the Indian REIT sector, according to the Cushman & Wakefield report.
REITs, first introduced in the United States in 1960, allow retail investors to participate in commercial real estate through a liquid, exchange-listed vehicle. As of December 2022, there were 893 listed REITs worldwide, with a combined equity market capitalization of approximately $1.9 trillion.
India introduced regulatory guidelines for REITs in 2014, with Embassy REIT becoming the first listed REIT in 2019. This was followed by the listing of Mindspace Business Parks REIT in 2020, Brookfield India Real Estate Trust in 2021, and Nexus Select Trust in May 2023.
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By Ravi Kumar