REITs have been one of the highest discussed subjects over past few quarters and not without reason.
It can provide the much needed monetizing opportunity for the asset owners while providing investment options to pension funds, long-term investors and every individual who couldn’t take part in the real estate investment class due to the high capital requirement.
It takes away all major risks associated with real estate like delays, construction stoppage, corporate governance, lack of funding etc and provides the investor a direct access to income yielding professionally managed properties. So REITs are definitely a very important part of Indian real estate.
The Indian Government has played its part by easing all possible challenges linked to the REIT listing. It has relaxed all possible requirement for an easy launch of REIT.
In a recent step, it also allowed REITs to raise debt by issuing debt securities and also removed the minimum requirement of two assets. So from government’s point of view, I believe they have done enough.
In terms of size, we anticipate the overall REIT market in India to be approximately USD 46 bn, 50% of which can be reached in the first 3 years of the launch of the first REIT itself.
Close to 290 mn sq ft of REIT compliant grade A stocks are already available in top 7 cities. The key here is the first launch of REIT and its performance.
However, considering the delays in launches against expectations of all experts in the country, I believe one should be cautious on the timing of the launch.
I believe it will take 3 to 4 quarters before the first REIT gets launched in India. However, the performance of initial REITs will set the stage for the others.
Shobhit Agarwal is MD & CEO – ANAROCK Capital.