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INDIAN REITS – WHERE THEY ARE NOW (AND WHERE THEY NEED TO GO)
Global investors have had their sights set on India’s burgeoning commercial real estate market for some time. With the success of the BlackstoneEmbassy REIT, a positive signal has gone out to all global investors to stake their claim. At the same time, REITs have opened fresh possibilities and new investment avenues for domestic retail investors…
Shobhit Agarwal

With the Indian real estate sector in the throes of a severe liquidity crunch, Real Estate Investment Trusts or REITs offer a funding lifeline to foreign and domestic investors to pump badly-needed money into the market. The overwhelming response to the launch of India’s first REIT by Embassy Office Parks - and its superlative performance - have propelled India into the league of mature markets of developed nations with a proper REIT structure in place.

Global investors have had their sights set on India’s burgeoning commercial real estate market for some time. With the success of the Blackstone-Embassy REIT, a positive signal has gone out to all global investors to stake their claim. At the same time, REITs have opened fresh possibilities and new investment avenues for domestic retail investors. The success of REITs in India could have an overarching effect on the entire real estate sector and could also trickle down to asset classes such as retail and logistics.

Defining REITs and their Benefits

REITs are investment instruments that pool capital from investors to purchase and manage income-yielding real estate assets or mortgage loans, and can be traded on major stock exchanges like BSE. These instruments would also enable banks to free up their balance sheets by reducing loan exposures and creating head room to finance fresh projects.

REITs are considered viable investment vehicles because of multiple advantages:

  • With a low entry point for investors, it’s easier for many to add commercial real estate to their portfolio at a much lower investment.

  • REITs offer handsome returns with projected ROI pegged between 12-14 percent in the long term, with minimum risks.

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October 2019

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