Will return to office give a new lease of life to Reits?

Reits are trading at a discount now but this is set to change as hybrid mode of working ends

- Akshat Rohatgi

India’s largest IT conglomerate, Tata Consultancy Services (TCS), recently signalled a momentous shift in the corporate world by discontinuing its hybrid work policy. Starting 1 October, all TCS employees have been mandated to work from office for five days a week. The move by TCS, a trendsetter in India’s corporate landscape, could set a precedent for other companies, potentially reshaping the future of work environments and positively impacting Real Estate Investment Trusts (Reits).

There has been a resurgence in demand for office space leasing this year as more firms summoned employees back to offices and this marks a positive turn for Reits, which were facing difficult times since the pandemic began and people opted to work from home amid lockdowns.

A Reit is a trust that owns a pool of income-generating real estate assets held as special purpose vehicles (SPVs). To be sure, at least 80% of these assets must be completed and income-producing. Reits, which are mandated by market regulator Sebi to distribute at least 90% of their cash flow to unitholders, have a unique structure that allows investors to participate in the income generated by commercial real estate assets.

India has three listed office Reits—Brookfield India Real Estate Trust (Brookfield Reit), Embassy Office Parks REIT (Embassy Reit), and Mindspace Business Parks REIT (Mindspace Reit) and one listed retail REIT—Nexus Select.

Retail Reits focus on properties such as shopping centres and malls that generate income from leasing space to retailers, including restaurants.

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