$15-20bn of commercial space eligible for REITs in 2-3 years

India potentially has about 375 mn sq-ft of Grade-A office space valued at $65-70 bn

Nearly 80-100 million sqft of commercial space worth $15-20 billion are eligible for Real Estate Investment Trusts (REITs) in the next 2-3 years, a recent survey said.

According to the survey by KPMG, India potentially has about 375 million sqft of Grade-A office space which is valued at $65-70 billion.

Out of this, 80-100 million sqft is estimated to be eligible for REITs in the coming 2-3 years and would be valued at $15-20 billion.

"REITs pose a large opportunity in the Indian real estate market which is backed by growing economy and more importantly by a large existing Grade-A commercial portfolio," KPMG said.

The report said in 2015 and 2016 nearly 52.6 million sqft and 57.1 million sqft, respectively, of commercial space is expected to be added.

"Most of the Grade-A properties, which will be added in the two years, will be concentrated in seven major cities like including Delhi NCR, Mumbai, Bengaluru, Chennai, Pune, Kolkata and Hyderabad," it said.

Apart from the Grade-A office spaces, there are other commercial assets such as shopping centres, hospitality and industrial warehouses which might come under the purview of 'REIT-able' space, thereby presenting a potential for increasing the overall stock, it said.

KPMG noted that REITs would not address the liquidity challenges faced by developers but are expected to help streamline the sector by creating a transparent mechanism for raising finance in the market as it would be governed by SEBI guidelines which would help in maintaining transparency and their accountability.

The agency, however, noted that certain amendments in the taxation and regulatory aspects of REITs are required, which would further enhance the attractiveness of Indian REITs for global investors.