The Reit Choice?

Real Estate Investment Trusts (Reits) Are Gaining Traction As Interest Rates Stabilise. But Returns Could Be Affected By Adverse Economic Conditions And Market Volatility

- NAVNEET DUBEY

THE SCENE

1 REITs took a while to take off after they were introduced almost a decade ago

2 There were a slew of REIT IPOS beginning in 2019 that carried on till 2023

3 Returns began to surge post Covid-19, attracting investors looking to diversify

4 Sebi, meanwhile, brought in a string of reforms like easing the investment threshold to boost investor participation

5 Experts see the demand for REITS growing; besides, they are expected to expand into newer areas like data centres

THERE WAS PALPABLE excitement in March 2019 as a new asset class was taking birth. It was finally time for the launch of the initial public offering (IPO) of Embassy Office Parks REIT (real estate investment trust), which marked a partnership between real estate major Embassy Group and private equity giant Blackstone.

By the time the IPO ended on March 20, 2019, the issue had garnered a subscription of 2.5 times, with the non-institutional segment seeing 3.10 times subscriptions. This was the first REIT offering to hit the Indian market, even though the asset class had existed elsewhere for some time.

REITs typically own a diversified portfolio of real estate assets, which may include commercial buildings, shopping malls, apartments, hotels, or even infrastructure projects. REITs allow individuals to invest in large-scale, income-generating real estate without actually having to buy, manage, or finance any properties themselves.

There are four listed REITs in India now—Brookfield India Real Estate Trust, Embassy Office Parks REIT, Mindspace Business Parks REIT, and Nexus Select Trust—having received timely boosts from regulatory changes.