NEW DELHI: India's real estate investment trust (REIT) market is expected to grow 31 per cent year-on-year in 2023, registering the fastest growth across Asia-Pacific, posing huge opportunities for investors, according to a report by real estate services firm Cushman & Wakefield.
In a year when the overall Asian REIT market fell 7% to $252 billion, partly contributing to this impressive growth was the introduction of Blackstone's Nexus Select Trust, the country's first listed retail REIT.
“The positive outlook for the office market, with employees returning to work and large transactions returning to the market along with high occupancy rates in existing portfolios, will further support the growth of Indian REITs,” said Somy Thomas, managing director, valuation, advisory and capital markets at Cushman & Wakefield. “With more developers listing their portfolios and continued institutional demand for quality assets in the office and retail sectors, the future is bright for the Indian REITs market,” he added.
The Indian market is still in its nascent stage with only four REITs. All four REITs have conducted initial public offerings (IPOs) within the last five years and have seen strong investor interest, indicating the product is attractive to investors.
There are 225 REITs operating across Asia, with traditional market powerhouses such as Japan, Singapore and Hong Kong accounting for over 80% of the combined share of Asia’s entire REIT market.
However, the emergence of mainland China and India's REIT markets, the fourth and fifth largest in Asia respectively, is adding new layers of opportunity and growth, the report said. India's strong performance highlights the country's emergence as a significant player, offering investors attractive diversification and growth opportunities, the report said. Nexus Select Trust owns a portfolio of 17 urban shopping centers in 14 first- and second-tier cities in addition to two hotels and three office assets, and its shares have risen 30% in the year since its IPO. The company plans to double its portfolio by 20 million square feet over the next five years through strategic acquisitions.
The top two office REITs — Embassy and Mindspace — have also posted CAGR returns of 9-10% over the past two years, reassuring investors and trustees' interest in the Indian REIT sector, according to a Cushman & Wakefield report.
REITs are a global asset class first introduced in the United States in 1960 to allow private investors to invest in commercial real estate through a liquid investment vehicle listed on a stock exchange.
There are 893 publicly traded REITs in the world, with a combined stock market capitalization of approximately $1.9 trillion (as of December 2022).
While India introduced regulatory guidelines for REITs in 2014, the product became a reality with the launch and listing of Embassy REIT in 2019.
Mindspace Business Parks REIT was listed in 2020, followed by Brookfield India Real Estate Trust in 2021. Nexus Select Trust was listed in May 2023.
