350 mn sq ft office space worth $60 bn to get SM-Reit listing by 2026: CBRE

Around 350 million square feet of prime office space, valuing more than $60 billion, will become eligible by 2026 to get listed as Small and Medium Real Estate Investment Trusts (SM-Reits), according to CBRE.

In March, capital markets regulator Securities and Exchange Board of India (Sebi) notified the framework for SM-Reits. At present, there are no listed SM-Reit in the country.

Real estate consultant CBRE on Thursday released its report titled, 'Navigating the SM Reit Landscape - A Look at Regulations and Implications'.

As per the report, the total completed office stock in India currently stands at over 800 million square feet, of which Reit-listed office inventory is over 88 million square feet.

"The potential market for SM-Reits in India covers over 300 million square feet of completed commercial space, besides an additional 50 million square feet of space expected to be completed by 2026. This translates into an estimated market size of over $60 billion," the consultant said.

"The introduction of the SM-Reits framework marks a pivotal moment for India's commercial real estate sector. By enhancing transparency and offering robust investor protections, SM-Reits are set to redefine portfolio diversification," Anshuman Magazine, Chairman & CEO, India, Southeast Asia, Middle East & Africa at CBRE, said.

This framework would not only mitigate risks associated with under-construction projects but will also ensure steady returns through mandatory quarterly distributions, making real estate a more accessible and secure investment option for a broader range of investors, he added.

CBRE noted that the new SM-Reit regulations provide a clear framework for Fractional Ownership Platforms (FOPs), which are investment vehicles pooling funds to invest in securities issued by special purpose vehicles (SPVs) that acquire real estate assets on a fractional or undivided ownership basis.

"Primarily targeting pre-leased, income-generating commercial properties, these platforms appeal to high-net-worth individuals (HNIs), non-resident Indians (NRIs), and overseas citizens of India (OCIs)," it added.

Managed by individual entities, FOPs have been classified by Sebi as a form of collective pooled scheme, necessitating the implementation of the SM-Reit regulations to ensure investor protection and market integrity.