REITs will continue to have strong potential in India in future: Experts

The real estate investment trusts (REITs) in India will continue to have "huge potential" in the future as these may expand to other asset classes such as industrial, data centre, hospitality, healthcare and education, experts said.

REITs are companies that own and operate income-producing real estate, and their shares are traded on stock exchanges.

"REITs in India are still at their early stages as compared to other regional markets. India's REIT market capitalisation is less than 10 per cent of that of countries like the US and Singapore and other countries in the Asia-Pacific region.

"Considering the size of the Indian office market, there exists a huge potential for more REITs and expansion of current REITs," Colliers India MD (Capital Markets and Investment Services) Piyush Gupta said.

Embassy Office Parks REIT Deputy Chief Financial Officer Abhishek Agarwal recently said the company remained optimistic about the office REIT market and was looking for expansion.

The company was in talks with sellers in Chennai for 5 million square feet (msf) of office space and also exploring other cities, he said.

It has a portfolio of 35 msf of office space. The company is building eight msf of business parks, of which two million sq ft is expected to be ready this year, he said.

"The overall returns on listed REITs in India, including dividend yield, have been a key factor in the success of real estate investment trusts in the country. The regulatory framework has also evolved and aligned with global best practices. In the coming years, we are likely to see REITs extend to other asset classes such as industrial, data centre, hospitality, healthcare, and education," Gupta said.

The evolution of REITs has also opened up opportunities for other asset classes, with India's first retail-focused Nexus Select Trust REIT getting listed in May 2023.

According to a Colliers India analysis, about 380 msf of the existing Grade A office space qualifies to be listed as REITs, out of 667 msf total office stock.

"Currently, the three listed office REITs hold around 74.4 msf of office REIT stock. Bengaluru has the largest share of REIT stock at 25 per cent, followed by Hyderabad at 19 per cent," it said.