Embassy Reit eyes Hyderabad; has 1.5 msf office development pipeline

Embassy Reit expects strong leasing demand to continue, targets 92 per cent occupancy in FY27 and is evaluating Hyderabad expansion with a 1.5 msf development pipeline

Embassy Real Estate Investment Trust (Reit) reported annual growth of 17 per cent in its net operating income and revenue, with earnings before interest, tax, depreciation and amortisation (Ebitda) also growing 16 per cent year-on-year. While global capability centres (GCCs) and artificial intelligence (AI)-related leasing drove the quarter ended June 30, 2026, the property trust projects a robust pipeline and demand momentum going ahead.

 

“We've leased 1.3 million square feet (msf) in the quarter (ended June 30, 2026) across 17 deals and, among the new entrants in Q1, 21 per cent were AI-related firms,” said Amit Shetty, chief executive officer of Embassy Reit, in a conversation with Business Standard.

 

“Initially, when the geopolitical issue started, there was a little bit of slowdown. (Now) the market is robust...the first half of the year has seen about 45.5 msf of gross absorption, which is the highest for the real estate industry in India...About 44 per cent was on the global capability centres (GCCs) side,” said Shetty. He added that around 110 new GCCs came to the country in the last two quarters.

 

“Overall, on the 1.3 msf, we've seen a 10 per cent higher spread,” said Shetty. Real estate investment trusts, put simply, pool capital from investors and operate commercial real estate. A positive spread, here, denotes an increase in the rental rates of new leases compared to the rates in the preceding leases. “On new leasing, we've seen a higher leasing spread of 11 per cent. On renewals, we've seen about a 9 per cent higher rental spread,” said Shetty.

 

For FY27, Shetty said the trust foresees occupancy of about 92 per cent. “We've given net operating income (NOI) guidance of 13 per cent from last year. On distribution per unit (DPU), we've given guidance of 10 per cent at the midpoint,” said Shetty. Embassy Reit declared a distribution of Rs 6.31 per unit for Q1FY27, up 9 per cent year-on-year.

 

Reit distributions are mandated returns to investors, which can be in the form of dividends, interest or other income. These trusts are required to distribute at least 90 per cent of their net distributable cash flows, as defined by Sebi.

 

On expansion, “We've got a pipeline of about 1.5 msf,” said Shetty. “Hyderabad is a market that we are keenly looking at,” he added. For ongoing office developments, the firm has projected a capex of Rs 3,500 crore.

 

Commercial offices operated by the trust recorded occupancy, by area, of 90 per cent in the first quarter of this financial year. While Bengaluru, Mumbai, Noida and Chennai surpassed 90 per cent occupancy, Pune reported occupancy of 59 per cent. “Pune is a little bit of a laggard for us because the demand is not very robust. We are in the western side of Pune, and most of the demand is in the central and eastern side of Pune,” said Shetty.

 

The real estate trust raised Rs 3,045 crore of debt in Q1FY27. “We have a debt book of about Rs 22,000 crore...60 per cent of that is fixed and 40 per cent is floating,” said Shetty. He added that since listing in 2019, the trust has grown its business by 75 per cent, adding, “So obviously, we've grown this by using debt.”

 

“The debt strategy is not a short-term strategy. It's always been a long-term strategy for us...Whenever we feel that the market is good, that's when we actually dip into the market and try to leverage that, trying to see how we can reduce our overall debt cost,” said Shetty.

 

“I believe that this asset class (Reits) is built for the masses simply because there is a very forecastable yield that can be predicted given the cash flows and the long-term contracts that we have with our clients,” said Shetty on retail investors adopting Reits.

 

“To compare this with the US, 50 per cent of all investors in the capital market have exposure to Reits, while in India, it's less than 0.02 per cent. So, we believe that the headroom is just unbelievable. But there needs to be a lot of work to be done in terms of awareness and investor education,” said Shetty. Embassy Reit was the first such trust to be listed and has around 150,000 retail investors on its books.