“We leased 1.3 million square feet (msf) during the quarter across 17 deals. Of the 0.7 msf of new leasing, 86 per cent was driven by new entrants, with AI-related companies accounting for 21 per cent of new leasing,” Amit Shetty, chief executive officer of Embassy REIT, told Business Standard.
“Initially, when the geopolitical issues began, there was a slight slowdown. The market is now robust. The first half of the year recorded around 45.5 msf of gross absorption, the highest for India’s office real estate industry, with GCCs accounting for approximately 44%,” Shetty said. He added that around 110 new GCCs had entered the country over the past two quarters.
Embassy REIT recorded a combined leasing spread of 10 per cent on the 1.3 msf leased during the quarter.
“On new leasing, we achieved an 11% re-leasing spread, while renewals were signed at a 9% higher rental spread,” Shetty said.
A positive leasing spread denotes an increase in the rental rates achieved on new leases or renewals compared with the rents under the preceding leases.
For FY2027, Embassy REIT has guided to an occupancy range of 92 to 93 per cent.
“We have provided an NOI guidance range of ₹4,150 to ₹4,350 crore, representing growth of 13 per cent at the midpoint over the previous year. On distribution per unit, we have guided to growth of 10 per cent at the midpoint,” Shetty said.
Embassy REIT declared a distribution of ₹6.31 per unit for Q1FY27, up 9 per cent year on year.
REIT distributions are returns paid to unitholders and can comprise dividends, interest, repayment of debt or other income. REITs are required to distribute at least 90 per cent of their net distributable cash flows, in accordance with Securities and Exchange Board of India regulations.
On expansion, Embassy REIT has an active development pipeline of 6.2 msf, with a projected capital outlay of ₹3,500 crore. It is also evaluating potential acquisition opportunities of around 12.6 msf. “Hyderabad is a market that we are keenly evaluating,” Shetty said.
The REIT's office portfolio recorded occupancy of 90 per cent by area during the first quarter. Bengaluru, Mumbai, Noida and Chennai reported occupancy levels above 90 per cent, while Pune recorded occupancy of 59 per cent.
“Pune is a little bit of a laggard for us because demand is not very robust. Our assets are located in the western part of Pune, while most of the demand is concentrated in the central and eastern parts of the city,” Shetty said.
Embassy REIT raised ₹3,045 crore of debt during Q1FY27 at a blended rate of 7.46 per cent.
“We have a gross debt book of approximately ₹23,000 crore, of which 59 per cent is fixed-rate debt and 41 per cent is floating-rate debt,” Shetty said. He added that Embassy REIT had grown its business by around 75 per cent since its listing in 2019.
“The debt strategy is not a short-term strategy. It has always been a long-term strategy for us. Whenever we believe market conditions are favourable, we access the market to optimise our debt profile and reduce our overall cost of debt,” Shetty said.
“I believe this asset class (RIETs) is built for the masses because it offers forecastable yields, supported by predictable cash flows and long-term contracts with occupiers,” Shetty said on the adoption of REITs by individual investors.
“To compare this with the US, 50 per cent of investors in the capital market have exposure to REITs, while in India it is less than 0.02 per cent. We believe the headroom is significant, but considerable work needs to be done on awareness and investor education,” he added.
Embassy REIT is India’s first publicly listed REIT and has over 1,50,000 unitholders, comprising foreign and domestic institutions as well as individual investors.
 "Amit Shetty, chief executive officer of Embassy Office Parks REIT")